Efficiency wages are
A)lower than market wages paid by employers to increase profitability.
B)higher than market wages paid by employers to increase productivity.
C)government determined minimum wages set to protect workers from unfair employers.
D)negotiated by unions when officials are interested in trimming work forces.

Question

Quizplus · Accepted Answer

Efficiency wages are higher than market wages paid by employers to increase the productivity of workers. This is because when workers are paid more than the market rate, they feel more motivated and committed to their jobs, resulting in lower turnover rates, and higher productivity. Employers who pay efficiency wages believe that the benefits in terms of lower training and hiring costs, and improved productivity, outweigh the additional labor costs.

Efficiency Wages Are