{"id":46189,"date":"2019-01-09T02:00:49","date_gmt":"2019-01-09T07:00:49","guid":{"rendered":"https:\/\/quotulatiousness.ca\/blog\/?p=46189"},"modified":"2018-12-19T11:02:57","modified_gmt":"2018-12-19T16:02:57","slug":"sticky-wages","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2019\/01\/09\/sticky-wages\/","title":{"rendered":"Sticky Wages"},"content":{"rendered":"<p align=\"center\"><iframe loading=\"lazy\" width=\"853\" height=\"480\" src=\"https:\/\/www.youtube.com\/embed\/IbiPQI0wMAk\" frameborder=\"0\" allow=\"accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<blockquote><p><strong>Marginal Revolution University<\/strong><br \/>\n<strong>Published on 2 May 2017<\/strong><\/p>\n<p>Imagine you\u2019re an employer during a recession, and you desperately need to cut labor costs to keep your firm afloat. Are you more likely to cut wages across the board for all employees, or institute layoffs for only some? <\/p>\n<p>While it may seem that wage cuts are the \u201cbetter\u201d choice, they aren\u2019t as common as you might think. Why is that? <\/p>\n<p>To answer that question, this video explores a phenomenon known as \u201csticky wages.\u201d <\/p>\n<p>In other words, wages have a tendency to get \u201cstuck\u201d and not adjust downwards. This occurs even during a recession, when falling wages would help end the recession more quickly. <\/p>\n<p>However, that\u2019s not to say that wages cannot adjust downward for an individual during a recession. This can happen, but likely only after an employee has been fired from their initial job, and eventually rehired by a different firm at a lower wage rate. <\/p>\n<p>Back to our original question &mdash; why are employers unlikely to cut wages? A big reason has to do with the effect on morale. Employees may become disgruntled and angry when they experience a nominal wage cut, and become less productive. <\/p>\n<p>An important note here &mdash; notice that we said nominal wage cut, meaning, not adjusted for inflation. If an employee receives a 3% raise in nominal wages, they may remain happy in their current position. But what if inflation is 5%? What does this mean for their real wage? (Hint: For an in depth answer to this question check out our earlier Macroeconomics video on \u201cmoney illusion.\u201d)<\/p>\n<p>Next week we\u2019ll return to our discussion on the AD\/AS model for a look at how factors such as \u201csticky wages\u201d affect the economy in the short run.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Marginal Revolution University Published on 2 May 2017 Imagine you\u2019re an employer during a recession, and you desperately need to cut labor costs to keep your firm afloat. Are you more likely to cut wages across the board for all employees, or institute layoffs for only some? While it may seem that wage cuts are [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":35193,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25],"tags":[95,1093,718],"class_list":["post-46189","post","type-post","status-publish","format-standard","hentry","category-economics","tag-jobs","tag-macroeconomics","tag-recession"],"jetpack_featured_media_url":"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2016\/06\/favicon.png","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-c0Z","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/46189","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=46189"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/46189\/revisions"}],"predecessor-version":[{"id":46190,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/46189\/revisions\/46190"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media\/35193"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=46189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=46189"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=46189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}