Final answer:
Efficiency wages are higher than equilibrium to encourage employee productivity and lower turnover, which can lead to structural unemployment, although they are not responsible for all such unemployment.
Step-by-step explanation:
The concept of efficiency wages is that employers pay workers more than the equilibrium wage level to boost worker productivity and to encourage better performance. This approach is based on the idea that better-compensated employees will have a greater incentive to work hard, as they are aware of the potential salary loss if they leave their current jobs. Furthermore, by paying higher wages, employers aim to reduce turnover, minimize the costs associated with training and hiring new workers, and maximize the benefits of having motivated employees. While efficiency wages can lead to an increase in productivity, they may also contribute to structural unemployment if the wages are set above what the market would normally dictate, as more people want the jobs at the higher wage rate than there are positions available.
It is important to note that while efficiency wages can be a factor, they are not responsible for all structural unemployment, and there are many factors that contribute to this type of unemployment. Moreover, unions may impact wage levels and employment quantities by negotiating for wages above the equilibrium level, which can have complex implications for the labor market.