Final answer:
The query is about pay for performance or merit pay, where an employee's wage increases correspond to their job performance. This system is complex due to difficulties in measuring individual productivity, especially in jobs with intangible outputs. Moreover, the efficiency wage theory posits that better-paid workers are more productive.
Step-by-step explanation:
The concept in question refers to pay for performance, a scenario where an individual's job performance is directly linked to the timing and amount of pay increases, often described as merit pay. Adjusting wages to match productivity levels can be challenging, as productivity is difficult to quantify, particularly for positions where output is not easily measured, like in the case of an accountant in a corporate tax department. Employers may provide wage increases based on observed trends in productivity, for instance, if productivity has consistently risen by a certain percentage. However, if productivity changes unpredictably, it could influence the natural rate of unemployment temporarily.
Furthermore, the efficiency wage theory suggests that by paying workers more, their productivity might increase, whether individually or as a group. This idea touches on the broader principles of effort and compensation, which are fundamental to theories of workplace merit and reward systems. Sociologists like Davis and Moore argue that higher rewards for more crucial work incentive workers to invest more effort and time into their roles.