Eﬃciency wage theory says that an above-market wage can reduce labor costs per unit of output by
eliciting greater work effort, lowering supervision costs, and reducing job turnover.

Question

Quizplus · Accepted Answer

Efficiency wage theory states that paying workers an above-market wage leads to increased productivity, as workers have a greater incentive to work harder and stay with the company. This can ultimately lead to lower labor costs per unit of output, as the higher productivity offsets the increased wage costs.

Eﬃciency Wage Theory Says That an Above-Market Wage Can Reduce