Wage Stickiness

Wage stickiness refers to the tendency of wages to resist change and remain fixed or slow to adjust, even when economic conditions shift. This means that during downturns, employers may be reluctant to decrease wages because of factors like contracts, morale, or legal constraints. Conversely, in times of economic growth, wages often don’t rise immediately. This rigidity can impact the overall economy by limiting how quickly wages respond to supply and demand changes, potentially contributing to unemployment or sluggish economic recovery during economic downturns.