When the economy goes into a recession and ﬁrms require less labor, managers tend to
A) reduce wages to reﬂect the lower demand for labor.
B) avoid cutting wages, for fear of drops in worker productivity.
C) lay off workers and keep wages of the remaining workers constant.
D) keep all of their workers by spreading work more thinly.

Question

Quizplus · Accepted Answer

When firms require less labor during a recession, it is common for managers to lay off workers to reduce labor costs. Keeping the wages of the remaining workers constant can be done to maintain morale and productivity, but it is not always the case. Cutting wages may cause demotivation among the workers, and spreading work more thinly may lead to lower productivity and burnout. Therefore, laying off workers and keeping the wages of the remaining workers constant is often the most logical and effective course of action.

When the Economy Goes into a Recession and ﬁRms Require