The theory of efficiency wages explains above-equilibrium wages by assuming that workers get a rise in wage when they prove they are increasing their productivity.

Question

Quizplus · Accepted Answer

The theory of efficiency wages suggests that employers pay above-equilibrium wages to increase worker productivity, reduce turnover, and attract better applicants, not necessarily because workers have already proven they are increasing their productivity.

The Theory of Efficiency Wages Explains Above-Equilibrium Wages by Assuming