The relative-wage explanation for the existence of downwardly sticky wages emphasizes ?
Correct answer: A. the contention that workers in one industry may be unwilling to accept a wage cut unless they know that workers in other industries are receiving similar cuts
- A. the contention that workers in one industry may be unwilling to accept a wage cut unless they know that workers in other industries are receiving similar cuts
- B. employment contracts that stipulate workers' wages usually for a period of one to three years
- C. unspoken agreements between workers and firms that firms will not cut wages
- D. the incentive that firms may have to hold wages above the market clearing rate
Explanation
The relative-wage argument says workers resist a cut if they believe comparable workers elsewhere have not also suffered cuts, because the cut feels unfair. The other choices describe contracts, implicit agreements, or efficiency-wage explanations.
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