Efficiency wage
Under an efficiency wage is understood in economics a wage that is paid voluntarily and an employer in order to increase labor productivity or to reduce turnover costs above the equilibrium level.
Broken down by neo-classical, sociological and psychological models of the article presents the motivation for paying efficiency wages. In the neoclassical range fall of the so-called shirking approach the fluctuation cost argument and the theory of adverse selection. The social efficiency wage theories is the social norms and the interaction between people given a decisive influence on human behavior. The extent of this influence must be considered in the design of efficiency wages, is described in the Fair-wage/Effort-Modell and the poison -exchange approach. The equity theory illuminates the subject of efficiency wage from a psychological perspective.
- 2.1 The Gift Exchange approach
- 2.2 The Fair-wage/Effort-Modell
- 3.1 Equity Theory
Neoclassical
No- shirking
The "no- shirking " model of C. Shapiro and J. Stiglitz (1984 ) is based on the assumption that employees tend to shirking. To achieve high productivity, this would require sufficiently high punishment for at most the dismissal. A monitoring of employees is not, however, carry no extra cost (monitoring). In addition, termination is only effective deterrent if it is accompanied by a high loss of income. However, if the workers in a labor market where supply and demand are in equilibrium, quickly find another point that is equal to well paid, this sanction is not very effective.
This gives an incentive for the employer to pay a higher wage than the market wage. In this simple model, all companies aim to discourage their employees from shirking. Thus, all companies will raise their wages, and they will then meet above the market-clearing levels. Through this higher personnel expenditure, the company may find it necessary to reduce staff numbers.
Turnover costs argument
Another explanation in the efficiency wage sector is mainly concerned with the importance of costs after termination and readjustment. It is based on the assumption that employees terminate, to look around on the labor market for better offers. The turnover costs incurred directly and indirectly. In a direct way through interviews or by incorporation costs; indirect costs are incurred, for example, by a lower productivity during the training. These issues are inevitable for the companies, as each new hires, it replaces the departing employee, no matter how fast, has a lower efficiency and he put the company costs more than an experienced employee.
Adverse Selection
The theory of adverse selection is based on the assumption that workers themselves know best and thus their value are aware of and ask for a higher wage for their more skilled labor. The companies can not assess the productivity of workers, and there's information asymmetry.
Companies offer salaries here, which are above the market-clearing wage. If, when the interview a candidate willing to work for less money for the company, so this will be rejected.
Sociological theories
The Gift Exchange approach
The poison - Exchange approach is as in the Fair-wage/Effort-Modell a sociological efficiency wage theory. The core of this theory is that the employment relationship is considered as an exchange of gifts. The employer " gives " the employee an hourly wage that is higher than the normal market. In return, the workers more intently on when he would do it at the normal rate of pay, and " gives " the employer thus a higher work performance.
The Fair-wage/Effort-Modell
In this model it is assumed that the performance of an employee depends on whether he feels his wages as just. The criteria for fair wages apply: the same wage for the same performance, perceived job performance must meet the perceived wage and the cost of employment (training costs and opportunity costs) must be reimbursed. It is also important that an employee compares itself with colleagues to determine whether the pay is fair. It is important that an underpayment indeed leads that work effort is reduced, an overpayment but does not lead to a further increase in performance of the employee.
Psychological approach
Equity theory
In addition to the sociological explanation approaches can be explained by equity theory, a similar relationship between pay and performance from a psychological perspective to explain. This theory goes back to Leon Festinger and in particular refers to the theory of cognitive dissonance. Cognitive dissonance occurs when the exchange ratio of work effort and wages of two people is perceived as different. Again, the need is aroused to act on the unfair exchange ratio so that justice is achieved. The injustice has not only underpaid people impact, but also to over -paid, as was demonstrated in an experiment of Pritchard / Dunnette / Jorgenson.