Supervision and High Wages as Competing Incentives: A Basis for Labor Segmentation Theory
Author(s)
Drago, Robert W.; Perlman, Richard
Abstract
Efficiency wage theories link wages to work effort by hypothesizing that higher pay elicits increased effort. The most prevalent variant of efficiency wage theory — the work-discipline version — predicts that imperfect information concerning work effort will lead to both a positive level of supervision and to wages above the market-clearing level. This paper presents a “competing incentives” model in which high wages play a role in enhancing trust; however, this effect is often incompatible with an emphasis on supervision.
