why wages are rigid downward?? please respond...?

Answer 1

Jan N has some interesting suggestions, but of course these are stock answers that don't really get to the heart of the problem. Why aren't wages flexible like prices? My own opinion is that economics has little to provide us with to answer that question because it has more to do with history, class identification, culture and tradition. In fact, if we allow this kind of thing to determine wages, we find that the economic model of supply and demand turns into simple tautology and tells us nothing about efficiency: people are paid simply the way they are because of discrimination, history, tastes and tradition. Efficiency has nothing to do with it. This explains why we can such large claims on the capital class with little apparent cost: - things like minimum wages, taxes, pollution controls, 40 hour work week, all were instituted and the entire world adapted and built the largest economic engine history has ever seen. Yet today even though we are cutting taxes and the minimum wage (except for last month), and have retrenched under Bush a bit for environmental costs, are economy seems to be beyond repair. Of course, I exaggerate for effect here, but I hope you get the idea.

Answer 2

Ah yes, once again we have people answering economics questions who do not know a thing about economics.

The expression "wages are rigid downward" is a phrase used in economics to indicate that while wages may increase, they very seldom fall - they are "rigid downward." So, why is it that wages tend not to fall/decrease. There are a number of reasons:

1) Many people work under a contract that specifies their wages - thus it would be illegal to lower a worker's wage.

2) There is a Federal law (and many state laws) that set a minimum wage that must be paid and this tends to put a "floor" under wages. (Note that there is no law regarding maximum wages!)

3) It is generally considered to be unacceptable to hire someone at one wage and then lower it, even if there is no labor contract involved.

4) Consumer spending accounts for 2/3 of the Gross National Product (GNP) and it is very important, politically, for wages to be stable, and definitely not declining.

That about covers it.

Answer 3

Wages are rigid downward because employers have agreements (written or implied) with employees that set the level of wages (sometimes, especially in collective bargaining situations, employers even agree to increase wages on a pre-negotiated schedule).

Answer 4

Do employers want to pay anything at all? All you need to do is to make yourself almost inneviably indispensable by your employer to earn your worth.

Wages are rigid downward because employer only think on how to multiply profits and not wages, their arguement usually rest on rising cost of operation.

Answer 5

Illegals.

Answer 6

As corporations gain more power, and "own" more politicians, the rights of the people diminish, and corporate profits increase.