One of the ways that firms seek to minimize shirking is through a compensation method known as paying an efficiency wage. Efficiency wage means to pay a wage higher than the market average wage for a specific job category. One of the reasons for paying a higher than average wage is to encourage employee loyalty. Suppose employees face a likelihood of receiving a lower wage for the same type of job with other companies. In that case, it is hoped that they will apply themselves more intensely in the current position with the current company. They will be more productive. Thus the high wage is compensated for with more productive work. Also, if there is less employee turnover because of an efficiency wage, there will be fewer training costs associated with training more new hires.

1. What other reasons having to do with minimizing shirking and increasing output would paying an efficiency wage satisfy?
2. Name at least two companies that make it plain to employees that they pay an efficiency wage. Do any of these companies explain openly why they pay an efficiency wage?
3. Give at least two other additional examples of how firms deal with shirking. Name and describe these two additional firms and describe how their approaches to minimize shirking work.