ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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positively on the money wage they are paid.
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positively on the real wage they are paid.
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inversely on the age of the workers.
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positively on the unemployment rate.
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Detailed explanation-1: -Efficiency wage theory posits that an employer must pay its workers high enough so that workers are incentivized to be productive and that highly skilled workers do not quit.
Detailed explanation-2: -Efficiency wage theory advocates paying your employees higher than the market wage for their role, and states that this is real ‘fair pay’. The reason for doing this is not generosity and consideration but through cold hard desire for profit maximisation. The logic behind the theory is simple.
Detailed explanation-3: -There are four different theories, according to which firms can benefit in four different ways from paying efficiency wages: higher employee effort, lower employee turnover, attracting higher quality employees, and more healthy employees.
Detailed explanation-4: -Efficiency wages refer to the level of wages paid to the employees to retain their skill set and improve the workforce productivity in an organization. The theory states that an increase in wages leads to increased productivity and motivates employees to stay loyal to the firm.