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The concept of efficiency wages is an old idea, dating back at least to Henry Ford's introduction of the "five dollar day" in 1914, at a time when the daily wage at manufacturing plants near his Highland Park factory was $2.30. Ford himself called it his finest cost-cutting move, because of the boost to productivity that came as a result. The manner in which Amazon announced its $15 wages is likely to boost the productivity gains coming from the wage hikes. How so? Beyond the classic notion of efficiency wages - I work harder because I fear losing a better-paying job - above-market wages can lead to a second productivity gain driven by employees' innate sense of reciprocity. Research (including our own work) has found that when a company gives unexpected pay increases, workers often reciprocate by working harder than is required (even if they don't worry about getting fired). And, what better way to signal your good intentions and concern for workers than through a flamboyant public announcement of a substantial pay raise.

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