Compensating differentials theory states that:Question 10Answera.pay levels and pay mix are designed to signal desired employee behavioursb.high wages will increase efficiency and lower labour costs if they lower turnoverc.higher wages must be offered to employees when chances of success are highd.higher wages must be offered to employees to compensate for any negative features of jobse.job seekers have a reservation wage level below which they will not accept a job offer
Question
Compensating differentials theory states that:Question 10Answera.pay levels and pay mix are designed to signal desired employee behavioursb.high wages will increase efficiency and lower labour costs if they lower turnoverc.higher wages must be offered to employees when chances of success are highd.higher wages must be offered to employees to compensate for any negative features of jobse.job seekers have a reservation wage level below which they will not accept a job offer
Solution
The theory of compensating differentials states that higher wages must be offered to employees to compensate for any negative features of jobs. So, the correct answer is option d. This theory is based on the idea that jobs which are more difficult, dangerous, or unpleasant must offer higher wages to attract workers. This is because workers need to be compensated for the additional risk or discomfort associated with these jobs.
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