A manufacturing firm pays its assembly line workers a wage that is specifically calculated to be just high enough to make the value of keeping their job greater than the value of being unemployed. Now, suppose the government significantly increases the generosity of unemployment benefits. To maintain the same level of worker effort and prevent slacking, how must the firm adjust the wage it pays, and why?

Worker Motivation at a Call Center

Factors Influencing the No-Shirking Wage

Factors Influencing the No-Shirking Wage

A firm pays its employees a wage premium specifically to discourage them from slacking on the job. If the local unemployment rate decreases substantially, the firm can maintain the same level of worker effort while paying a lower wage.

Worker Incentive Calculation

A firm sets its wage just high enough to create a significant cost of job loss, thereby discouraging employees from shirking. All of the following developments would require the firm to raise this wage to maintain the same level of employee effort, EXCEPT:

Two companies, a software development firm and a data-entry firm, operate in the same city and hire from the same pool of workers. The software firm finds it very difficult to monitor the day-to-day effort of its programmers, as their work is complex and creative. The data-entry firm, however, can easily track its employees' performance through keystrokes per hour. Assuming all other job aspects are identical, which firm would need to set a higher wage specifically to discourage slacking, and what is the economic reasoning?

Calculating the Minimum Incentive Wage

A company wants to set its wages just high enough to motivate employees to work hard. Match each external or internal change with its direct impact on the minimum wage the company must pay to prevent shirking, assuming all other factors remain constant.