A difference between the efficiency wage and the opportunity cost of labor is largely determined by

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The efficiency wage theory suggests that paying workers higher wages than the equilibrium level can increase their productivity, motivation, and loyalty to the firm. This is because workers feel they are being well-compensated and therefore work harder. On the other hand, the opportunity cost of labor refers to the value of the next best alternative forgone when choosing to work or not. The difference between the two is largely determined by the costs of monitoring employees, as the efficiency wage theory assumes that higher wages are used as an incentive to encourage workers to perform better, and monitoring is necessary to ensure that the workers are actually performing at a higher level. Therefore, the costs of monitoring employees can increase the difference between the efficiency wage and the opportunity cost of labor. The number of managers or the use of computers may indirectly affect this difference, but they are not the main determinants.

A Difference Between the Efficiency Wage and the Opportunity Cost