Final answer:
Employers are unlikely to pay lower wages to offset the cost of increased safety, as safety can improve productivity and profits. Labor unions often result in higher wages for members but could also lead to a decrease in hiring due to higher costs. Implicit contracts provide workers wage stability but may come with trade-offs.
Step-by-step explanation:
It is generally false that employers will pay lower wages to compensate for the cost of increased safety. In fact, labor economics suggests that employers who invest in safety may also witness increased productivity and morale, which can translate into higher profits that more than offset the cost of implementing safety measures. Furthermore, the presence of labor unions is typically associated with higher pay for worker members due to collective bargaining power. However, employers might hire a lower quantity of workers due to increased labor costs. This potential dynamic is part of an implicit contract that acts as a form of insurance for employees, offering protection against wage declines during bad times at the expense of potentially higher wages during good times.
An implicit wage contract suggests that firms are reluctant to cut wages even in tough times, avoiding damage to worker morale and retention. Higher safety standards mandated by such contracts would not necessarily be offset by lower wages; rather, they would be part of the overall value proposition provided by the employer to retain a committed and productive workforce.