The wage curve
A) shows that, with higher regional rates of unemployment, wages for otherwise comparable workers are higher.
B) is evidence that most national economies have regionally integrated labor markets.
C) may exist because efficiency-wage premiums can be smaller in areas of high unemployment.
D) is evidence that wages are always at equilibrium.

Question

Quizplus · Accepted Answer

Efficiency-wage theories suggest that employers pay a premium above the market-clearing wage to increase productivity and reduce turnover. In areas of high unemployment, the threat of job loss can motivate workers even at lower wages, allowing employers to offer smaller efficiency-wage premiums. This explains why wages might be lower in regions with higher unemployment, aligning with the wage curve concept.

The Wage Curve