A higher wage could result in a lower labor cost per unit of output than a lower wage if the higher wage
A) is accompanied by an offsetting decline in fringe beneﬁts.
B) increases supervision costs.
C) reduces job turnover.
D) increases worker absenteeism.

Question

Quizplus · Accepted Answer

A higher wage that reduces job turnover can result in a lower labor cost per unit of output because it reduces the need to recruit, train, and integrate new employees into a team, which can be costly and time-consuming. Therefore, retaining experienced and skilled workers can increase productivity and efficiency, offsetting the higher wage cost. On the other hand, option A refers to fringe benefits, which are additional compensation that workers receive beyond their wages, such as health insurance, retirement plans, or paid leave. If the higher wage is accompanied by a decline in fringe benefits, it may not result in a lower labor cost per unit of output if workers perceive it as a reduction in their total compensation package. Option B refers to supervision costs, which may increase if higher wages attract more workers with lower skills or motivation, requiring more monitoring and training. Finally, option D refers to worker absenteeism, which may increase if higher wages reduce the need to show up to work to maintain employment or if workers have more money to spend on leisure activities that conflict with their work schedule. Therefore, higher absenteeism can increase labor costs by reducing the overall output per worker.

A Higher Wage Could Result in a Lower Labor Cost