Efficiency Wage

This article talks about Efficiency Wage, which is higher than market wage paid to encourage higher output and to raise worker morale, and to discourage absenteeism and inventory shrinkage. It is the argument is that paying workers a higher wage may lead to increased productivity from the worker. It offer therefore a market failure explanation of unemployment – in contrast to theories which emphasize government intervention. Efficiency wage is the idea that it might be beneficial for employers to pay workers more than the equilibrium wage in some cases.