High Wages Drive Efficiency and Reduce Unemployment, Study Finds
Efficiency wage theories suggest that companies may pay higher wages than necessary to keep workers motivated and prevent turnover. This can lead to lower unemployment rates and attract better employees. These theories can explain why wages differ between industries and why some workers are paid more than others with similar skills. By offering delayed payments, some issues with efficiency wages can be resolved without limiting job availability. Overall, these theories help understand why wages vary across different sectors and how they can change during economic ups and downs.