- You are hired by the Fair Work Commission Australia as a consultant to
examine issues relating to pay and performance. Your task is to provide a
report detailing findings from the economic literature on the effectiveness of
pay for performance, and how performance should be evaluated based on
incentive pay.
In the economic literature, the Efficiency Wage Theories focus exclusively on
the relationship between pay and performance. The Efficiency Wage Theories
(EWT) maintain that firms should offer their employees a wage that is above
the market clearing rate. Paying employees a wage premium raises productivity,
workplace cohesiveness, employee responsibility and loyalty, and reduces
shirking. Conversely, a wage that is below the prevailing market rate can
contribute to employee dissatisfaction and other negative attitudes (e.g. outrage
and a desire for revenge), and ultimately a high turnover.
You should aim to think critically and write originally.
A key component of the assessment of the assignment will be based on
your ability to explain your answers using the economic concepts and
theory discussed in this unit. You will be rewarded for linking the theory
with a real life example.
You are required to research this topic. Use the readings on “Efficiency
Wages” (in LMS) to build up your essay.
