Which of the following is a major advantage of piece wages in labor markets?

• A. They provide a direct incentive for workers to increase productivity.
• B. They guarantee a fixed income regardless of output.
• C. They reduce the need for supervision and quality control.
• D. They ensure equal pay for all workers regardless of skill level.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand what piece wages are. Piece wages refer to a payment system where workers are paid based on the number of units they produce rather than a fixed hourly wage or salary.
2. Step 2: Identify the implications of piece wages on worker behavior. Since pay depends directly on output, workers have a financial incentive to increase their productivity to earn more.
3. Step 3: Compare piece wages to other payment systems. Unlike fixed wages, piece wages do not guarantee a fixed income regardless of output, so the statement about guaranteed fixed income is incorrect.
4. Step 4: Consider the effects on supervision and quality control. While piece wages encourage productivity, they may not necessarily reduce the need for supervision or quality control, as workers might focus on quantity over quality.
5. Step 5: Evaluate the fairness aspect. Piece wages do not ensure equal pay for all workers regardless of skill level; instead, pay varies with output, which often depends on skill and effort.