3.

As mentioned in the scenario, a group of investors is about to create a new start up, a
speciality Software Company based in Bangalore. I would like to recommend efficiency
wage theory when it comes to determining marketing managers pay. Below are the reasons
for it :

 Increasing wages can lead to increased labour productivity because workers feel more
motivated to work with higher pay. Knowing the fact that its a start up and its not too
economical to pay higher wages, we should also think about the job role we are
planning for. Since marketing manager is the one who plays important role in
initiating, planning, executing the business, the start up has to go for higher salary to
get the best employee for the job. Therefore if firms increase wages – some or all of
the higher wage costs will be recouped with higher labour productivity.

In theory, higher wages could cause increased labour productivity (MRP). In this
case, the wage increases can pay for themselves.

  If they have a job with a wage significantly higher than benefits or alternative jobs,
they will have greater motivation to impress their boss and keep it. Workers with a
higher wage will work at an effort level which involves no shirking. This wage is
above market-clearing levels.

 If workers receive a higher pay, they may just feel more loyalty towards the company
and be willing to work harder and with more determination.
  Good labour relations depended on goodwill. Firms could pay wages above market-
clearing levels, and in return, workers would take on more responsibility and
initiative.
  Lower wages are associated with higher levels of supervision. Workers receiving
higher wages are more motivated and therefore needed less managerial supervision.
 If a firm pays above the market clearing level, it will attract a better quality worker
who will feel they can get a relatively better-paid job.