Walter Frick, Harvard Business Review, April 23, 2015

The theory of efficiency wages has made a comeback in recent years. It suggests that firms sometimes have an incentive to pay workers more than the going rate because doing so attracts better candidates, motivates them to work harder, and encourages them to stay at the company longer. Since shirking and turnover are costly, higher wages make financial sense, at least up to a point. But the story of efficiency wages doesn’t start and stop with traditional economic incentives. […read more]