Efficiency Wages and Employee Work Effort:

Abstract

The study analyzes the efficiency wage theory and the fair wage hypothesis using the self-reported survey data of Pakistan’s Telecom sector. The focus of the study is to explore how efficiency wages, job separation rate, time to find an alternate job and the monitoring intensities affect the level of efforts. The paper finds strong support for the shirking model, suggesting that the provision of efficiency wages along with the monitoring technology encourages employees to exert higher effort. Moreover, it examines the relationship between self-reported effort levels and fair wage perceptions. The results are in line with the fair wage effort theory. The study suggests that wage comparisons within and outside the firms are important determinants of worker effort.