What is the rationale for efficiency wages? How do efficiency wages help address the principal-agent problem?

The rationale behind efficiency wages is that employers will enjoy greater effort from their workers by paying them above equilibrium wages. An above equilibrium wage may enhance worker efficiency in several ways. It enables the firm to attract higher-quality workers; it lifts worker morale; it lowers turnover; workers are more likely to put forth their best effort with less supervision and monitoring, thereby reducing or eliminating the principal-agent problem.