One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages. This supports the efficiency wage model as it seems to provide evidence of what?
A)The existence of dual labor markets.
B)There are compensating differentials being paid depending on the type of work being done.
C)Unemployment is constant across sectors.
D)High-wage firms take advantage of delayed-compensation contracts.
E)Workers voluntarily provide bonds in case they are caught shirking.

Question

Quizplus · Accepted Answer

The existence of dual labor markets, where some sectors pay higher wages than others, is consistent with the predictions of the efficiency wage model. In these markets, firms that pay higher wages attract a better pool of workers who are more productive, leading to higher profits for these firms. This creates a segmented labor market, where workers in the high-wage sector enjoy better job security and working conditions than those in the low-wage sector.

One Piece of Evidence in Favor of the Efficiency Wage