Before the widespread acceptance of the efficiency-wage theory, scholars believed that increased worker productivity benefited workers in two ways: higher real wages and/or reduced working hours. According to the efficiency-wage theory, however, the causation can go the other way as well: productivity depends on the real wage paid by the firm. Productivity gains from higher wages result primarily from greater incentives to work coupled with diminished incentives to shirk, and secondarily from employers' ability to raise productivity by using higher wages to reduce turnover; improve morale, and attract superior applicants.

Just as an efficiently higher wage may lower per-unit labor costs, so might judiciously shortened workweeks. Most workweek reductions; such as France's 1998 decision to implement a 35-hour workweek, are meant to ameliorate unemployment. While this is a worthy objective, the efficiency-week theory predicts far greater benefits. The theory asserts that an optimal number of hours worked per week will increase the productivity of the labor force for reasons akin to those argued by the efficiency-wage theorists. Moreover, an efficient week can have substantial social and economic benefits: workers will have more time to spend with family, as well as more time to consume a greater volume of goods.

The passage implies that the decision to implement a 35-hour workweek in France was based on which of the following assumptions?

Firms will not reduce the wages of the workers who move to a reduced workweek.

Reducing the hours of existing workers will increase the number of available jobs.

Unemployment is more readily subject to amelioration than are other social problems.

A reduction in the workweek is a more effective means of lowering per-unit labor costs than is an increase in wages.

Reducing the workweek will have a number of social and economic benefits, of which a reduction in unemployment is the most important.


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