Four employers have justified their actions as follows.Whose logic is not consistent with the logic of efficiency wage theory?
A)Jay develops a new assembly line technology that limits the amount of shirking workers may do, so he reduces what he pays his employees so as to make it closer to the equilibrium wage.
B)Kay pays her workers less than the equilibrium wage so they won't have the time or money to look for work somewhere else.
C)Ray pays his workers in a developing country more than the going wage hoping that they will get a better diet and so be more productive.
D)All of the above are not consistent with the logic of efficiency wage theory.

Question

Quizplus · Accepted Answer

Efficiency wage theory predicts that paying workers higher wages than the equilibrium wage will lead to higher productivity and lower turnover. However, Kay's logic of paying workers less than the equilibrium wage to prevent them from looking for work elsewhere is not consistent with this theory. It may lead to unmotivated and low-quality work.

Four Employers Have Justified Their Actions as Follows