The Hindu

Sticky wages



It refers to the tendency of wages in a market economy to fall slower than other prices. The term was coined by British economist John Maynard Keynes, in his book The General Theory of Employment, Interest and Money, to explain the prevalence of widespread unemployme­nt in the West during the Great Depression of the 1930s. Keynes claimed that workers refused to accept any fall in their wages, even as other prices fell rapidly, which in turn pushed employers to remove them from employment. Other economists have contended that wage floors imposed by government­s, rather than sticky prices, were the real cause behind mass unemployme­nt.

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