# Wage rigidities

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- Post ID: 593551
- Modified: 2023-07-25T21:14:00+00:00
- Language: en

## Definition

Unless otherwise defined, the inability to adjust nominal wages downward (an economic situation in which a decline in demand and, therefore, a fall in profit is not accompanied by a fall in wages: a downward inflexibility). Wage rigidities are observed by the ECB in the course of the two-pillar principle. If wage costs cannot be reduced when demand for the products of a company or the economy as a whole falls, a situation arises in which the marginal costs (incremental costs) of labor - roughly: what a worker costs per hour - are higher than the marginal product of labor - roughly: what the worker creates in value per hour. But this leads to the reduction of labor: to unemployment. - See stand-by money, unit labor costs, rigidities, structural. - Cf. ECB Monthly Bulletin, January 2006, p. 75 f. (comparison of the U.S. with the euro area; references): Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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