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Wednesday, June 10, 2015

Walmart and Wages

Paul Krugman:

Notes on Walmart and Wages (Wonkish): Walmart reports that its recent wage hike is paying off via reduced turnover, which produces cost savings that offset the direct expense of the higher wages. In other words, efficiency wage theory is vindicated. What are the political/policy implications? What follows is a slightly wonkish note, largely to myself.
Efficiency wage theory is the idea that for any of a number of reasons, employers get more out of their workers when they pay more. It could be effort, it could be morale, it could be turnover. The causes of the efficiency gain could lie in psychology, or simply in the fact that workers are less willing to risk better-paying jobs with bad behavior. ...
Or to put it differently, efficiency wages suggest right away that the invisible hand’s grip on labor is a lot looser than people imagine, that wages are relatively easy to shift with social and political pressure. And this is one important reason attempts to reduce inequality can and should involve working on the distribution of market income as well as ex-post redistribution through taxes and transfers.

    Posted by on Wednesday, June 10, 2015 at 09:33 AM in Economics, Income Distribution | Permalink  Comments (21)


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