The ________ explanation for the existence of downwardly sticky wages emphasizes the contention that workers in one industry may be unwilling to accept a wage cut, unless they know that workers in other firms and industries are receiving similar cuts.

Question

Quizplus · Accepted Answer

The relative-wage explanation suggests that workers may resist wage cuts if they perceive them as unfair compared to wages being paid in other industries or firms. Therefore, it emphasizes the importance of wages in relation to those in other sectors, rather than their nominal, minimum or living levels.

The ________ Explanation for the Existence of Downwardly Sticky Wages