Efficiency Wage
Definition
Paying above the market-clearing wage to motivate effort, reduce turnover, or attract better workers. Generates involuntary unemployment.
Example
Ford's $5/day wage in 1914 cut turnover and reportedly raised productivity.
Paying above the market-clearing wage to motivate effort, reduce turnover, or attract better workers. Generates involuntary unemployment.
Ford's $5/day wage in 1914 cut turnover and reportedly raised productivity.