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Wage Efficiency

Wage Efficiency TheoryHuh, didn’t know that there was an economic theory that posits that under certain conditions, companies will want to increase wages for labor because such wage increase will provide benefits. Those benefits could be reduced turnover, increased productivity or whatever else. This theory certainly isn’t mentioned much, if at all. I have heard increasing engagement or productivity via wage increases, especially for those at the lower end of the wage scale, more as a logical statement, not as an economic theorem.

But then Paul Krugman posted a blog on wage efficiency and that blog came about because Walmart recently said their minimum wage increases were producing gains in the form of reduced turnover. Imagine that…Walmart is seeing a benefit of raising salaries via reduced turnover.

I hope this is a start of a change in companies’ attitude toward their employees.


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