Final answer:
There are several reasons why a firm might choose to pay its employees a wage higher than that which would clear the market. One reason is that it raises the opportunity cost of shirking for employees, leading to increased productivity. Another reason is that it may attract more qualified and motivated workers. Additionally, it can result in a lower overall wage bill by replacing experienced workers with less expensive inexperienced workers.
Step-by-step explanation:
From the firm's point of view, paying employees a wage higher than that which would clear the market can have several reasons. One possible reason is that a higher wage raises the opportunity cost of shirking for employees. When employees are paid more, they have more to lose by not putting in effort at work, which can lead to increased productivity. Another reason is that a higher wage may shift the labour demand curve to the left. By offering a higher wage, the firm may be able to attract more qualified and motivated workers, resulting in higher productivity and profits. Additionally, paying a higher wage can result in a lower overall wage bill by reducing the proportion of experienced to inexperienced workers. By hiring more inexperienced workers at a lower cost and replacing experienced workers, the firm can reduce costs and potentially increase productivity.