According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker increases.

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Quizplus · Accepted Answer

Efficiency-wage theories suggest that paying workers higher wages can result in increased productivity as they are more motivated to work harder and produce higher-quality results. Higher wages can also attract better job applicants, leading to lower turnover and reduced training costs. However, paying wages higher than equilibrium can also lead to increased shirking as workers may take advantage of the higher pay and reduce their effort at work. Unionization is unrelated to efficiency-wage theories.

According to Efficiency-Wage Theories, Firms Benefit by Paying Higher-Than-Equilibrium Wages