Question

According to​ salary, the average salary for a software engineer level III​ (a higher-level position in software design and​ implementation) in the Silicon Valley area of California is​ $108,244. However, Google pays its level III software engineers an average salary of​ $124,258. Why does Google pay a salary higher than the equilibrium salary for equivalent positions in the same​ area?

Answer 1

Answer:

Google acts according to the efficiency wage theory.

Explanation:

The efficiency wage theory states that if an employer increases the wage of his/her employees, they will be motivated and their productivity will increase. The increase in productivity should offset the increased labor costs. So the costs of higher wages should be recouped through increased productivity. Higher wages also reduce worker turnover, reducing hiring and training costs.