Firm X arranges its pay such that workers are underpaid early in their career but are overpaid later in their career such that workers are,if they stay with the firm,on net better off.A necessary condition for this method of underpayments followed by overpayments to work is that
A) less motivated workers are more likely to stay with the firm and thus need more incentives to work hard.
B) workers discount the future with a high interest rate.
C) this sequencing of pay raises worker productivity.
D) supervising workers is cheap and effective.

Question

Quizplus · Accepted Answer

This method relies on the idea that the promise of higher future earnings will motivate workers to be more productive throughout their career. If the sequencing of pay does not raise worker productivity, the firm's strategy would not be effective in incentivizing workers or improving overall performance.

Firm X Arranges Its Pay Such That Workers Are Underpaid