10 Reasons Why Firms are Offering Above Average Salaries and Perks
🔥 Employers get more if they pay more... Beyond the reasons for this already mentioned in the summary of Efficiency Wages
, below I listed 10 key reasons for and effects of offering Efficiency Wages
(above industry standard salaries/wages):
1. INCREASED WORK EFFORT: When workers are paid above the market wage, they often feel a sense of obligation and motivation to put in extra effort. This can result in increased productivity as employees strive to meet or exceed employer expectations.
2. HIGHER JOB SATISFACTION: Receiving higher wages than what is commonly available in the labor market can lead to greater job satisfaction among employees. Satisfied workers are generally more engaged and motivated to perform well.
3. LOWER TURNOVER: Efficiency wages are often used as a tool to reduce employee turnover. When workers are paid well, they are less likely to seek alternative employment opportunities, which stabilises the workforce and reduces the costs associated with hiring and training new employees.
4. ATTRACTION OF HIGH-QUALITY TALENT: Firms paying efficiency wages may attract a higher calibre of job applicants. Skilled and experienced workers may be drawn to companies offering better compensation packages, leading to a more talented and productive workforce.
5. REDUCED SHIRKING AND ABSENTEEISM: Employees receiving above-market wages have a stronger incentive to avoid shirking (slacking off) and absenteeism, as they do not want to jeopardise their well-paying jobs. This can result in better attendance and a reduction in unproductive behaviours.
6. IMPROVED EMPLOYEE HEALTH: Some studies suggest that higher wages can lead to improved overall health among workers. Healthier employees are often more productive and take fewer sick days.
7. ENHANCED TRAINING AND SKILL DEVELOPMENT: Firms paying efficiency wages may invest more in training and skill development for their employees. This investment can lead to a more skilled and adaptable workforce, contributing to increased productivity.
8. POSITIVE WORKPLACE CULTURE: A workplace that rewards employees with efficiency wages may foster a positive and cooperative culture. Workers may be more willing to collaborate and share knowledge, further enhancing productivity.
9. HIGHER OUTPUT AND QUALITY: The combination of motivated, satisfied, and skilled employees can result in higher levels of both output and product/service quality.
10. COMPETITIVE ADVANTAGE: Firms that effectively leverage efficiency wages can gain a competitive advantage in their industry. Their higher productivity levels and better-quality output can lead to increased market share and profitability.
⇨ Let's try to make this list as complete as possible. Thanks for your comments.
Carter S., "The Impact of Wages on Employee Productivity", Forbes, 2019, September, vol, pp. 9-13
Simpson O., "What is efficiency wage theory?", Perkbox, 2018, pp. 4-9.