Final answer:
Employees may prefer base pay over performance pay due to the stability and predictability of income, job security provided by higher base wages, and the motivation to maintain their position. Efficiency wage theory plays a role in this preference by suggesting higher pay leads to higher productivity and loyalty. Employees also enjoy the protections offered by implicit contracts during economic downturns.
Step-by-step explanation:
Employees might prefer base pay over performance pay for various reasons related to job security, predictability of income, and motivation. Efficiency wage theory suggests that employees with higher pay tend to be more productive as they value the security of their current position, and fear a salary decline if they lose their job. Consequently, this motivates them to work harder and to remain with their employer. Moreover, employers may opt to provide higher base pay rather than encounter the costs and time associated with recruiting and training new personnel, thus they avoid wage cuts and earn the resulting benefits of having motivated and dedicated employees.
An implicit contract often exists between employers and employees, acting as a form of insurance against wage declines in bad economic times, while also keeping salary increases moderate during prosperous times. This implicit understanding can make employees prefer the stability of a base salary over the variable nature of performance pay, which may fluctuate with the company's performance or economic cycles.
Furthermore, factors such as salary and benefits, growth and development, and career advancement opportunities play significant roles in an employee's preference for a stable base pay structure, which is often perceived as a foundation for long-term career planning and financial stability.