Workers prefer layoffs to wage reductions during economic downturns because
A)layoffs benefit workers more than the firms.
B)workers try to provide firms with incentives to report true economic conditions.
C)firms will keep workers even during economic downturns to avoid more costs.
D)there is symmetric information.

Question

Quizplus · Accepted Answer

During economic downturns, firms may consider reducing wages or laying off workers to cut costs. However, workers prefer layoffs because they see it as a signal that the economic conditions are truly bad and that wage reductions are temporary. By providing firms with this incentive to report true economic conditions, workers can make better decisions about their future job prospects. Additionally, layoffs often come with unemployment benefits and job search assistance, while wage reductions do not.

Workers Prefer Layoffs to Wage Reductions During Economic Downturns Because