The efficiency-wage theory of worker turnover suggests that firms with

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The efficiency-wage theory suggests that firms that pay their workers higher wages than the market rate will have lower turnover rates because workers are motivated to keep their jobs. However, if a firm cannot afford to pay higher wages, they may still experience high turnover rates. High turnover leads to higher costs associated with recruiting and training new workers, resulting in higher production costs. As a result, profits will likely decrease. Therefore, firms with higher turnover will have higher production costs and lower profits.

The Efficiency-Wage Theory of Worker Turnover Suggests That Firms with