A third type of efficiency-wage theory emphasizes the link between wages and worker quality. All firms want workers who are alimented, and they try to pick the best applicants to fill job openings. But because firms cannot perfectly gauge the quality of applicants, hiring has a degree of randomness to it. When a firm pays a high wage, it attracts a better pool of workers to apply for its jobs and thereby increases the Quality of its work force. If the firm responded to a surplus of labor by reducing the wage, the most competent applicants-who are more likely to have better alternative opportunities than less competent applicants-may choose not to apply. If this influence of the wage on worker quality is strong enough, it may be profitable for the firm to pay a wage above the level that balances supply and demand.

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