What does the term "sticky-rigid" refer to in Microeconomics?

Question

I know it has something to do with wages

Answer 1

Sticky or rigid is a difference in economics that refers to all prices, not just wages.

One abstraction in economy theory is the idea that companies can change prices instantaneously: if I own a restaurant and I want to raise my prices, I can reprint all my menus overnight and all my prices are changed. Or I can lower all my waiters' salaries at the same time, or else fire them all and hire new ones at a lower salary. Neither of these is realistic, of course, but the question is how unrealistic it is.

The idea that prices or wages cannot be changed immediately is the idea of price stickiness: prices "stick" to the level they were at, and only change slowly. Companies can't lower wages because they sign contracts, menus can't be reprinted overnight because it costs a lot of money. Some economists think these costs are minor: restaurants generally guess their prices correctly enough that they don't have to change often, and the companies that are paying the wrong salaries go out of business and are replaced by companies paying better (either higher or lower) salaries. They would say that prices are not very sticky. Other economists say these costs are high, and it takes a while to change things: they say prices are sticky or rigid.

Answer 2

Prices (including wages) are said to be "sticky" or "rigid" if they are not allowed to fall. For example, a collective bargaining agreement or a long-term supply contract may have clauses that set prices regardless of how the open-market price changes during the life of the contract.