Efficiency Wages and Employee Work Effort Case Study of Pakistan Telecom Sector

Abstract

The study analyzed the efficiency wage theory and the fair wage hypothesis using the self-reported survey data of Pakistan Telecommunication Industry. The focus of the study is to explore how incentive mechanisms, fear of penalty, wages, unemployment rate and the monitoring techniques affect the level of efforts. The paper finds strong support for the shirking model, suggesting that effective incentive scheme encourages employees to exert higher effort. It further explores that stick and carrot factors are functioning side by side in Pakistan Telecom sector. Moreover, it examines the relationship between self-reported effort levels and fair wage perceptions. However, the results are not in line with the fair wage effort theory. The study suggests that wage comparison within and outside the firms are important determinants of worker effort.