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 remaining workers constant
D) Keep all of their workers, by spreading work more thinly

Question

Quizplus · Accepted Answer

When firms require less labor due to a recession, they may lay off workers to adjust to the lower demand. However, managers may choose to keep the wages of remaining workers constant to maintain employee morale and avoid reducing worker productivity. This is because wage cuts can lead to demoralization, low motivation, and attrition, as workers feel undervalued and may seek better job opportunities elsewhere. So, laying off workers and keeping wages constant is a more practical and sustainable choice for managing labor in a recession.

When the Economy Goes into a Recession and Firms Require