Social Sciences and History / Unit 14 SSH 1320 short lesson, about 20 seconds
Cyclical Unemployment and Sticky Wages
Captions available
The idea
Cyclical unemployment rises and falls with the business cycle. With flexible wages the labor market would clear, so economists explain why wages are sticky, especially downward: implicit contracts, efficiency wage theory, adverse selection of wage cuts, the insider-outsider model, and relative wage coordination.
In practice
Cut everyone's pay and the best leave.
Where people slip
Efficiency wages: better-paid workers produce more.
Your place on the trail
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