Tate has no problem sharing his salary, but it’s unclear the main driver of the salary. In reality, salaries are comprised of a variety of skill and compensating differentials as well as potential efficiency payments. Tate has a doctorate of pharmacy, which should result in higher pay for human capital investments. In the clip above he mentions that people could die if he messes up, which probably adds a lot of pressure to his workday. This pressure could be a compensating differential that increases his pay. However, there’s also a chance he’s paid highly so that he doesn’t goof off, which would be an efficiency payment.
Office Space — Incentives & Efficiency Wages
Peter needs incentives or he is not going to work hard. You can also use this clip to discuss the principle-agent problem when it comes to workers.
Thanks to James Tierney for the clip and description.