It's a lot to do with contacts and replaceability. Employees are slow to accept a wage cut, while an inflation real cut they can't do anything about. Employees can often be difficult to replace and mess up the supply chain, especially if many go at the same time, so those Employees have a better negotiation positions.
Well while you are at it please go down and find out how to fight in a war, because you forgot the human element in your equations. Remember the average income of the volunteers family was 104000 dollars a year. The people in your lower class didn't give a shit about 9/11. So any major war that your economic plan finds it selves in you will have to fight it yourselves. Go ahead and try to draft them. Either they will sit on their hands at the swearing in. And go to Leavenworth or go to the front lines and when told to advance they won't. Now look up who the enemy will shoot and hang. good luck.
Management learns from experience that when wages are lowered and morale slips, the most productive and most easily employed workers find better-paying jobs elsewhere. On the other hand, when management lays off a percentage of workers, they select the least productive workers to lay off. There is also an effective wage cut when workers maintain the same wages but take on the work load of the laid-off workers. Workers don't seem to mind that as much, either.
Productivity has only gone up since the 70s and yet wages have not kept up, the minimum wage should , at minimum, be $25 to keep up with the standards prior to the Reagan administration. These workers have only increase productivity since then due to technological advances. The employers need workers more than visa versa. They just own a factory full of capital and tools and no product, collecting dust. All wage labor cannot match the productivity of the worker so all wages can increase at the expense of profit. It's that simple. They would pay you less if they could but Just like the government has the right to demand safe working conditions, the government has the right to enforce minimum wage, or demand overtime pay to workers, or child labor laws. The government fundamentally has the right to ensure workers are compensated and able to participate in the economy they helped create. That is the contract between the business and government. In order for the business to have access to resources like land and the roads that and workers, they have to follow safety and environmental standards and pay their workers at least federal minimum wage. Paying a livable wage would even see business becoming winners as their workforce now may eat, which would lead to an even higher productivity. Just ask yourself; how would you design a society if you didn't know your role in it?
How about during the better times instead of giving raises give bonuses so that it's not expected, and then not giving the bonus or giving a smaller bonus during the recession, so it doesn't look like a cut? Can that work?
Here's a question, why hasn't the market adapted to this fact? Why aren't (some) companies keeping money on the side to use to buy up newly available talented workers during these recessions?
Companies have indeed adapted in the way you suggest. They will hire someone at a lower wage than they enjoyed with their previous employer without making them angry. They are doing the best they can. But there are two problems. One is that a recession means everyone has difficult time, including new employers. During recessions there is low demand. It makes little sense to hire when you don't expect anyone to buy your product. The second is that the fact that people are victims to their own money illusion, makes them move around, and searching for a new job and retraining is a costly process, slowing the economic recovery.
I think that the stickiness of wages should be dependant on how big the wage is. At minimum wage (for that which is required to maintain, perhaps, at least a lower-middle-class standard of living), I think the wages should absolutely be sticky because any further decreases to minimum wage-workers' pay might sink their lives into (further) poverty. At wages far above the minimum wage for a decent standard of living (e.g, the wages of big company CEOs, billionaires, other rich people, etc), I think that wages should not be sticky at all and that if anything, the wages of the wealthiest should be first considered for being cut, since they have plenty. It is unfortunate that those with the least are typically first prioritized for getting fired or wage cuts than those with the most.
Less production and lower gdp. Is like a baker selling bread. The baker can either lower the price or sell less bread. Obviously, it is better to sell the bread at a lower price than throwing it into the garbage bin
Money illusion... Wait why would employees wages get cut with zero inflation going on? You can't give a example and change the control variable(inflation rate) and give a result you're bias towards, it's not a fair comparison.
So you explain what sticky wages are but you don’t explain why lower wages are better for the economy? If anything they are worse for the economy because it will drive down consumer demand because workers (who are consumers) will have less resources to demand with.
Could you please add English sub below? My English listening skill is not so good. If EngSub is available, it will be easy for me to understand. Thank you!
Capitalism on its highest. Rather giving a fuck in moral than taking the risk of having a little lower output. Still i can comprehend these desicions. Everybody would do it alike. Especially when your Job depends on the effect of your desicion
Perfect... most people said how dumb the government because they can't deal with inflation year by year. If they watch this video they will realize who's dumber LOLs...
I am not even a economics student, but don't know why I am continuously watching videos after videos from this channel.
if you're watching videos of economics and you're learning, then my friend you are a student of economics indeed
The fact that Mr. Tyler EXPOSED HIS BROTHER LIKE THAT.... damn...
Amazing explanation. Thank you, well done.
I wonder if sticky wages apply also to CEOs and executives. Are they so keen to cut their own wages in order to adjust for a recession or depression?
It's a lot to do with contacts and replaceability. Employees are slow to accept a wage cut, while an inflation real cut they can't do anything about. Employees can often be difficult to replace and mess up the supply chain, especially if many go at the same time, so those Employees have a better negotiation positions.
This man is a money wizard. I swear I’m drinking his tea
Thanks for the awesome videos! I'm about to kick my Macro Final's butt thanks to you guys. Keep up the awesome work
Good luck, Richard! -Meg
Well while you are at it please go down and find out how to fight in a war, because you forgot the human element in your equations. Remember the average income of the volunteers family was 104000 dollars a year. The people in your lower class didn't give a shit about 9/11. So any major war that your economic plan finds it selves in you will have to fight it yourselves. Go ahead and try to draft them. Either they will sit on their hands at the swearing in. And go to Leavenworth or go to the front lines and when told to advance they won't. Now look up who the enemy will shoot and hang. good luck.
Now throw that in your equation. HAHAHA!
@@donaldgrant9067 dare I ask...what happened here?
Management learns from experience that when wages are lowered and morale slips, the most productive and most easily employed workers find better-paying jobs elsewhere. On the other hand, when management lays off a percentage of workers, they select the least productive workers to lay off.
There is also an effective wage cut when workers maintain the same wages but take on the work load of the laid-off workers. Workers don't seem to mind that as much, either.
Good point!
Productivity has only gone up since the 70s and yet wages have not kept up, the minimum wage should , at minimum, be $25 to keep up with the standards prior to the Reagan administration. These workers have only increase productivity since then due to technological advances. The employers need workers more than visa versa. They just own a factory full of capital and tools and no product, collecting dust. All wage labor cannot match the productivity of the worker so all wages can increase at the expense of profit. It's that simple. They would pay you less if they could but Just like the government has the right to demand safe working conditions, the government has the right to enforce minimum wage, or demand overtime pay to workers, or child labor laws. The government fundamentally has the right to ensure workers are compensated and able to participate in the economy they helped create. That is the contract between the business and government. In order for the business to have access to resources like land and the roads that and workers, they have to follow safety and environmental standards and pay their workers at least federal minimum wage. Paying a livable wage would even see business becoming winners as their workforce now may eat, which would lead to an even higher productivity. Just ask yourself; how would you design a society if you didn't know your role in it?
Amazing expanation... simple and clear!
Thanks for your excellent explanation and practice questions. Hats off!
Thanks for the comment! Let us know how your studies go and where we can improve.
-Roman
How about during the better times instead of giving raises give bonuses so that it's not expected, and then not giving the bonus or giving a smaller bonus during the recession, so it doesn't look like a cut? Can that work?
Here's a question, why hasn't the market adapted to this fact? Why aren't (some) companies keeping money on the side to use to buy up newly available talented workers during these recessions?
Companies have indeed adapted in the way you suggest. They will hire someone at a lower wage than they enjoyed with their previous employer without making them angry. They are doing the best they can. But there are two problems. One is that a recession means everyone has difficult time, including new employers. During recessions there is low demand. It makes little sense to hire when you don't expect anyone to buy your product. The second is that the fact that people are victims to their own money illusion, makes them move around, and searching for a new job and retraining is a costly process, slowing the economic recovery.
I think that the stickiness of wages should be dependant on how big the wage is.
At minimum wage (for that which is required to maintain, perhaps, at least a lower-middle-class standard of living), I think the wages should absolutely be sticky because any further decreases to minimum wage-workers' pay might sink their lives into (further) poverty.
At wages far above the minimum wage for a decent standard of living (e.g, the wages of big company CEOs, billionaires, other rich people, etc), I think that wages should not be sticky at all and that if anything, the wages of the wealthiest should be first considered for being cut, since they have plenty. It is unfortunate that those with the least are typically first prioritized for getting fired or wage cuts than those with the most.
Can you share a video on New Keynesian macroeconomics?
it's blow my mind about employee morale
Question. What about instead of cutting wages, employers cut the hours of the employees and keep the same hourly rate?
Less production and lower gdp. Is like a baker selling bread. The baker can either lower the price or sell less bread. Obviously, it is better to sell the bread at a lower price than throwing it into the garbage bin
This video shows a fact that instead of cutting cutting wages, employers cut the working hours. this is the meaning of sticky wages.
this helped me so much
will you publish a video about the short-run aggregate supply?
good video by the way
Yep, that's coming next week! :) -Meg
Fantastic :)
awesome video!
Tyrone???
Seems racist to me, implying that black people are angry and impulsive.
Do wages increase in inflation
Thank you 💗
Money illusion... Wait why would employees wages get cut with zero inflation going on? You can't give a example and change the control variable(inflation rate) and give a result you're bias towards, it's not a fair comparison.
So you explain what sticky wages are but you don’t explain why lower wages are better for the economy? If anything they are worse for the economy because it will drive down consumer demand because workers (who are consumers) will have less resources to demand with.
excellent ! and sooo true !!!
What if the work force was actually educated?
Could you please add English sub below? My English listening skill is not so good. If EngSub is available, it will be easy for me to understand. Thank you!
your wishes have been answered.
2021
Capitalism on its highest. Rather giving a fuck in moral than taking the risk of having a little lower output. Still i can comprehend these desicions. Everybody would do it alike. Especially when your Job depends on the effect of your desicion
Perfect... most people said how dumb the government because they can't deal with inflation year by year. If they watch this video they will realize who's dumber LOLs...
such a cute video
Dahm workers are being fooled
FIRST