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Author: | Bewley, T. F. |
Title: | Why not cut pay ? |
Journal: | European Economic Review
1998 : MAY, VOL. 42:3-5, p. 459-490 |
Index terms: | PAY UNEMPLOYMENT RECESSION LABOUR BUSINESS CYCLES |
Language: | eng |
Abstract: | In the early 1990's, the author has interviewed more than 300 business people, labour leaders, business consultants, and counselors of unemployed people from the Northeast of the USA in order to learn why wages and salaries declined in only a few firms. Employers were reluctant to cut pay because they believed doing so would hurt employee morale, leading to lower productivity and current or future difficulties with hiring and retention. It was thought these effects in the end to cost more than savings from lower pay. The findings support none of the theories of wage rigidity except those of Solow and Akerlof that emphasize morale. |
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