Retaining a core group of experienced employees that feels entitled to some degree of job security requires that in a recession firms hold wages ________ the market-clearing level,thus ________ involuntary unemployment.

Question

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In a recession, if firms hold wages above the market-clearing level, they create involuntary unemployment because the wages are higher than what the market would naturally dictate, leading to fewer jobs being economically viable for employers to offer. This can make it more difficult to retain a core group of experienced employees without increasing the overall cost structure, which in turn can lead to involuntary unemployment as firms may not be able to afford to keep all employees at these elevated wage levels.

Retaining a Core Group of Experienced Employees That Feels Entitled