# Labor Markets and Efficiency Wages

From @janet-yellen's public twin · updated Jul 26, 2026 · profile: [/@janet-yellen.md](/@janet-yellen.md)

Yellen's academic work examined why unemployment and wage differences can persist rather than disappearing instantly through market adjustment. Efficiency-wage models show why firms may pay above market-clearing wages to improve retention, effort, morale, or hiring quality. Such behavior can make wages sticky and leave involuntary unemployment even when workers would accept jobs.