Three employers have justified their actions as follows.Whose logic is not consistent with the logic of efficiency wage theory?
A)Instead of spending money on an electronic timing system that monitors worker hours,Tom spends an equivalent amount of money on higher wages.
B)Dick pays his workers less than the equilibrium wage so that they will not have the time or money to look for work somewhere else.
C)Harry pays his workers in a developing country more than the going wage hoping that they will get a better diet and so be more productive.
D)None of the above is consistent with the logic of efficiency wage theory.

Question

Quizplus · Accepted Answer

Choice B is not consistent with the logic of efficiency wage theory because it assumes that paying workers less than the equilibrium wage will discourage them from seeking work elsewhere, but this does not necessarily result in increased productivity or efficiency. Efficiency wage theory suggests that paying workers above-market wages can increase their productivity and efficiency by providing incentives to work harder and reducing turnover. Choices A and C are consistent with the logic of efficiency wage theory because they involve paying higher wages to increase productivity and efficiency. Choice D is not correct because it does not provide an answer to the question.

Three Employers Have Justified Their Actions as Follows