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Why Not Cut Pay?

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Abstract

Over 300 business people, labor leaders, business consultants, and counselors of unemployed people were interviewed during the recession of the early 1990's in order to learn why wages and salaries were declining in only a few firms. Employers believed that cutting pay would hurt employee morale, leading to lower productivity and current or future difficulties with hiring and retention. There were few indications that unemployed people had excessive wage expectations. On the contrary, many unemployed were too flexible and found themselves rejected by firms as overqualified.

Suggested Citation

  • Truman F. Bewley, 1997. "Why Not Cut Pay?," Cowles Foundation Discussion Papers 1167, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1167
    Note: CFP 963.
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    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d11/d1167.pdf
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    Cited by:

    1. Torstein Bye & Erling Erling Holmoy, 2010. "Removing Policy-based Comparative Advantage for Energy Intensive Production: Necessary Adjustments of the Real Exchange Rate and Industry Structure," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 177-198.
    2. Fabrice Collard & David de la Croix, 2000. "Gift Exchange and the Business Cycle: The Fair Wage Strikes Back," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 166-193, January.
    3. Rafael Muñoz, "undated". "Skilled and unskilled employment in a Spanish business cycle model," Studies on the Spanish Economy 20, FEDEA.

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