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Sticky Wage Theory: Why Salaries Don’t Fall in Recessions and How It Shapes Jobs, Inflation, and Economic Recovery
In many economic models, prices and wages are assumed to adjust quickly in response to shifts in supply and demand. However, real-world labor markets often behave differently. Sticky wage theory describes a situation in which employee pay does not easily decline, even when economic conditions weaken or unemployment rises. This resistance to downward adjustment can…