What happens to the piece rate if there is a ratchet effect?
A) It decreases over time.
B) It increases over time.
C) It is replaced with a time rate.
D) It is replaced with a salary contract.
E) It is only paid to the least productive workers.

Question

Quizplus · Accepted Answer

The ratchet effect refers to the phenomenon where, once a higher level of productivity is achieved, the expectations for future productivity levels increase accordingly. In the context of piece rate pay, this can lead to a decrease in the rate paid per piece over time as employers adjust rates based on past productivity improvements, expecting workers to maintain higher levels of output for the same or less pay per unit.

What Happens to the Piece Rate If There Is a Ratchet