Applying the Efficiency Wage Theorem to Healthcare Contracts
First few Article Sentences
The Efficiency Wage Theorem (EWT) suggests that worker productivity is elastic in response to wages; in other words, if paid more, more motivated workers will take self-organizing actions to increase their rate of work (Osterman, 1994). EWT has been studied in a number of settings, including healthcare. This essay contains an examination of some of the key literature in the field to determine if there are proven benefits to applying EWT in healthcare and, if so, what are the mechanisms for achieving these benefits. The conclusion is threefold. First, EWT applies to healthcare settings as to other business settings. Second, EWT works in healthcare because of equity theory (Adams, 1976), which ties more broadly into theories of wages and motivation. Third, EWT only applies differently to different provider populations within the healthcare industry, requiring a customized approach to compensation.
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