If productivity increases as wages increase and firms pay a wage ________ the market clearing wage, then a potential benefit these firms may receive is a(n) ________ in employee turnover.

Question

Quizplus · Accepted Answer

When firms pay a wage above the market clearing wage, employees are more likely to stay with the company, resulting in a reduction in employee turnover. This is because the higher wage makes it more attractive for employees to stay with the company rather than seeking higher-paying jobs elsewhere. Additionally, a reduction in employee turnover can lead to cost savings for the firm, as they will not have to spend as much money on recruitment, training, and onboarding new employees.

If Productivity Increases as Wages Increase and Firms Pay a Wage