Varszegi follows two rules in labor relations: he never hires anyone who worked under Communism, and he pays his workers four times the market wage. This makes perfect sense in light of the above remarks about monitoring costs: there are very few employees per store and monitoring their behavior is very costly. If there were only a small penalty to being fired, there would be great temptation to slack off. By paying the workers much more than they could get elsewhere, Varszegi makes it very costly for them to be fired — and reduces his monitoring costs significantly
Source: freakonomics.com
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