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What is the likely result when a company pays below-market wages?
AIt may be unable to hire skilled people
BIt must offer more paid vacation time
CIt has to shorten the labor agreement
DIt gains the most productive applicants
Answer & Solution
Correct answer: A. It may be unable to hire skilled people
1. An employer can choose to pay at, above, or below the going rate.
2. Most firms try to stay competitive within their geographic area or industry.
3. A firm that pays below the market may find it cannot hire skilled people, because those people have better offers elsewhere.
4. Option D reverses the effect, since low pay repels rather than attracts strong applicants.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 8 "Managing Human Resources and Labor Relations", section 8.6 Employee Compensation and Benefits_
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