Question

The idea that only the most efficient workers will depart in response to a wage cut is called ________.

Answer 1

The idea that only the most efficient workers will depart in response to a wage cut is called adverse selection of wage cut.

What is the adverse selection of wage cut?

The adverse selection of wage cuts argument points out that if an employer reduces the wages for all workers in poor business conditions, then the employment alternatives at other firms, are the most likely to leave.

The least attractive workers with very few employment alternatives, are more likely to stay in this condition.

Companies which are experiencing difficult times can pursue workers to take a pay cut for the short term, and still have most of the firm’s workers.

Learn more about the adverse selection of wage cut here:-

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