Efficiency wages give employees an incentive to work hard and remain with their present employers, but contribute to structural unemployment.

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Efficiency wages refer to paying above-market wages to employees as an incentive for them to work harder and remain more committed to their current employer. While this can be beneficial for employers in terms of increasing productivity, it can contribute to structural unemployment, as it may result in a surplus of workers seeking employment at these higher wages and a shortage of available jobs. This can lead to a situation where some workers are unable to find employment at these wages, resulting in structural unemployment.

Efficiency Wages Give Employees an Incentive to Work Hard and Remain