Question

Stan has an employee, barbara, who is critical to stan's company. he knows that replacing her will be costly and difficult so he pays her a salary that is 10% higher than the market salary for qualified employees like barbara. this wage differential is likely an example of:

Answer 1

This wage differential is likely an example of "efficiency wages".

In labor economics, the efficiency wage theory contends that wages, in any event in a few markets, frame in a way that isn't showcase clearing. In particular, it focuses to the motivator for administrators to pay their workers more than the market-clearing wage keeping in mind the end goal to expand their profitability or effectiveness, or lessen costs related with turnover, in enterprises where the expenses of supplanting work are high. This expanded work profitability as well as diminished costs pay for the higher wages.