Asked by Becky Tseng on Jun 19, 2024
Verified
Above-equilibrium wages paid by some employers as an incentive for better performance are called compensating differentials.
Equilibrium Level
The state in which market supply and demand balance each other, resulting in stable prices and quantities.
Efficiency Wages
A higher wage paid by employers to increase worker productivity and loyalty, reducing turnover and shirking.
- Understand the principle of compensating differentials and their role in creating differences in wages.
Verified Answer
MS
Malika SabharwalJun 23, 2024
Final Answer :
False
Explanation :
Compensating differentials refer to wage differences across jobs that compensate workers for the non-monetary characteristics of different jobs, such as risk or undesirable hours, not for better performance. Above-equilibrium wages paid as an incentive for better performance are often referred to as efficiency wages.
Learning Objectives
- Understand the principle of compensating differentials and their role in creating differences in wages.
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