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Essay / Research Paper Abstract
This 4 page paper looks at the economic concept of efficiency wages, and explains what they are and then considers the advantages and disadvantages for a firm that uses efficiency wages as part of its human resource management strategy. The bibliography cites 3 sources
Page Count:
4 pages (~225 words per page)
File: TS14_TEeffwage.rtf
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Unformatted sample text from the term paper:
will fall until there is a point of equilibrium reached, where either there is an increase in the level of demand and/or there is a decrease in the level of
supply as the potential profit from that supply decreases. The converse is also true, where there is an excess of demand over supply the prices will increase until the level
of demand decreases and/or there is a increase in the level of supply, especially if there is an abnormal profit (Nellis and Parker, 2006). This is true in most markets,
although there may be some mediating factors. The concept efficiency wage hypothesis looks at how wages may be impacted by more than the simple equation of supply and demand.
The theory of efficiency wages is the idea that wages paid should be higher than the market clearing rate for wages (Krueger and Summers, 1988). Whilst this may not
be seen as economically sound in the short term, increasing wages costs, the long term benefits may be attractive. Efficiency wages help leads to the company preventing employees leaving, as
the cost of leaving is higher where wages are higher (Krueger and Summers, 1988). Loyalty may be encouraged and the group norms may increase in term of productivity due to
the higher. For example, if many companies are paying wages in terms of the supply and demand, and a company is paying wages at a high level, if the employee
leaves are likely to suffer a wage reduction so are less likely to be. This is shown in figure 1 where there is a supply and demand line shown, with
the price of labor been the point of intersection, but at the red X marked as P2 may be the efficiency wage level. This demonstrates that the efficiency wages
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