wage rigidity

Wage rigidity refers to the situation where workers' wages do not easily change, either going up or down, despite shifts in the economy or company performance. This often occurs due to contracts, laws, or social expectations, making it difficult for employers to reduce wages during downturns or increase them when the economy improves. As a result, wages tend to stay fixed in the short term, which can lead to issues like unemployment or wage inflation over time. Wage rigidity helps maintain income stability for workers but can also hinder economic adjustments during economic fluctuations.