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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Give four explanations for why firms might find it profitable to pay wages above the level that balances quantity of labor supplied and quantity of labor demanded.

To determine

Profitability of offering high wage.

Explanation

There is some profitability for the firm in paying higher than equilibrium wage rate. They are as follows: workers health, worker turnover, discouraging strike, and to attract better pool of works.

Workers health: The wage and health are closely related. The workers earning higher wages will have more nutritious diet, which makes them healthier and more productive. A firm considered this scenario to be more profitable, hence pay high wages to the workers because healthy workers will lead to high productivity. So, it is good for the firm.

Worker turnover: The reason of reducing turnover is that it is costly for firms to hire and train new workers...

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