New Study Reveals Optimal Wage-Setting Mechanisms for Maximum Welfare Gains
Labor economists studied different ways wages are set and found that the efficiency of wage mechanisms depends on the balance between human capital investment costs and job vacancy creation. If workers contribute more to finding a job than to their actual work, wage posting is most efficient. If their work output is more valuable, wage bargaining is better. And if these contributions are similar, competitive wages work best. These results support previous research findings.