Dear Sir, In the classical capitalism, due to the division of labour, the skills
required at the work place are easily replaceable and also replicable. This means
that there will always be surplus manpower available. The demand for labour will
always be less than its supply. This will result in only just enough wage that
will keep the worker fit enough to work.
Mr Ford's experiment of providing efficiency wages to all failed with the effects
of the Great Depression on the jobs. He too had to lay off a large number of
people. However, workers have been incentivised to work for higher than normal pay
with the arrival of Industrial Productivity techniques that looked at worker
productivity in far wide ranging terms.
In India, except for the unionized workforce, the hire and fire policy is still
operating!!. A large number of low skilled people have been absorbed in the
'Contractual System" of working. This is another term for sweatshops. These people
have no job security. They work with labor contract companies and get paid 'market
wages'. I wonder if there is any efficiency wage for these workers.
Best Regards,
K.Paranjpe.
On Mon, 07 Apr 2014 10:43:03 +0530 wrote
> This can be true only in countries where 'hire and fire' policy is legal. In
India this principle of efficiency wages does not hold good. RegardsVirendra
GoelFrom: join_mtc@googlegroups.com [mailto:join_mtc@googlegroups.com] On Behalf
Of drjaganmohanreddy
Sent: Sunday, April 06, 2014 2:55 PM
To: join_mtc@googlegroups.com
Cc: drjaganmohanreddy@gmail com
Subject: [MTC Global] Efficiency WagePaying equilibrium market wages. Pay higher
than market wages — what economists call efficiency wages. Henry Ford tried this
first in 1914 and found the company's productivity and profits going up
significantly.The efficiency wage theory suggests that if an employer pays higher
than market wages, it will first of all ensure that workers don't shirk their
duties.The reason is they will be afraid of losing a job paying more than what the
market would pay. Second, since the incentive to shirk is reduced, it also means
you don't need to monitor them all the time. So you save on monitoring costs,
unless you are one of those control-freak nags that some of us probably are.
Third, to the extent efficiency wages lead to lower turnover, the employer will
also save the cost of training a new domestic worker every few months.The
efficiency wages hypothesis argues that the benefits are large enough so that the
cost of paying the higher wages is well worth it. Sociological models also relate
this theory to notions of fairness. According to these, when workers believe they
are being paid more than the market wages, they might feel morally obligated to
reciprocate the kindness of their employer by working harder.Best
wishesDrAJaganMohanReddySent from Samsung Mobile--
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