When workers expect the real wage to rise at a rate similar to productivity improvements,________.

Question

Quizplus · Accepted Answer

If workers expect the real wage to rise at a rate similar to productivity improvements, they will likely only supply labor if they see an increase in the real wage. This leads to a decrease in labor supply, which will then cause the real wage to rise. This is because there are fewer workers available to fill positions, so employers may need to offer a higher wage to attract workers.

When Workers Expect the Real Wage to Rise at a Rate