wagesIn theory,wages ought to change and so that the supply demand in the labour market are always in equilibrium。In practice,wages are often sticky,especially in a downward direction when demand for labour falls。In this situation in the fall in demand results unemployment higher and many governments impose a minimum wage that employers must pay。Firms may choose to pay above the equilibrium wage to increase productivity of the workers。- Such so called efficiency wages may make workers to another firm less likely join cutting,so the employer’s hiring and training costs。They may encourage workers to do a better job。attact They may also a higher quality of worker。In recent years,employers have tried to reduce wage stickiness by increasing the proportion of pay that is linked to the perfomance of their firm。Thus if the falling demande reduces employer’s profit the pay of its employees falls automatically,so it does not have to lay off workers as many as it would otherwise。
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