When productivity is variable, piece rates tend to ______ compared with wage rates.
A) decrease earnings inequality
B) keep earnings inequality constant
C) increase earnings inequality
D) change earnings inequality in an indeterminate manner

Question

Quizplus · Accepted Answer

Piece rates pay workers based on the amount of work they produce, so workers who are more productive will earn more than those who are less productive. This creates a wider range of earnings among workers, which increases earnings inequality. Wage rates, on the other hand, pay workers a fixed hourly wage regardless of their productivity, so there is less variation in earnings and therefore less inequality.

When Productivity Is Variable, Piece Rates Tend to ______ Compared