1. As Mark Thoma points out, for individual workers in given jobs, nominal wages are sticky downward.
2. As Pedro Silos and Lei Fang point out, workers who change jobs after being unemployed during a recession tend to take lower wages. Pointer from Mark Thoma.
Apr 4 2012
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Apr 4 2012
When they teach their subject, economists almost always start with microeconomics. Why? Because it's easier to reach clear-cut answers when you start small. Once you know what you're talking about, you can build on it. When economists can't give their macroeconomics strong microfoundations, they...
Apr 4 2012
1. As Mark Thoma points out, for individual workers in given jobs, nominal wages are sticky downward. 2. As Pedro Silos and Lei Fang point out, workers who change jobs after being unemployed during a recession tend to take lower wages. Pointer from Mark Thoma.
READER COMMENTS
Pedro
Apr 4 2012 at 10:43am
2) But according to Alchian, they should take longer to find a job if 1) is correct, leading to higher measured unemployment.
joeftansey
Apr 4 2012 at 11:24am
Given inflation, couldn’t Thoma’s chart indicate that leaving nominal wages constant is the cheapest way to cut wages? I.e. if you want to cut someone’s wages between 2-3%, you can either do it explicitly now, or just leave their wages constant and wait it out.
This doesn’t say anything about what we would see without inflation. I.e. if management didn’t have the option to wait it out.
Has anyone investigated the extent to which nominal stickiness is an artifact of inflation?
Floccina
Apr 4 2012 at 2:46pm
Here is quote of Edmund Phelps on econ talk:
http://www.econtalk.org/archives/2010/02/phelps_on_unemp.html
So doesn’t this imply that in a period of lower that expected inflation, working employees are more overpaid than normal and so their is not enough money circulating to reach full employment even though new hires are willing to work for less?
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