Efficiency Wages and the Wage Structure

This paper examines differences in pay for equally skilled workers in
different industries. The major finding is that there is substantial
dispersion in wages across industries, even after allowing for measured and
unmeasured labor quality, working conditions, fringe benefits, transitory
demand shocks, threat of unionization, union bargaining power, firm size and
other factors. Some direct evidence in favor of efficiency wage theories is
presented. The evidence suggests that industry wage differentials are
successful in eliciting better performance through reduced turnover and
increased effort.