Definition of 'Sticky Wage Theory'
An economic hypothesis that the pay of employed workers tends to respond slowly to the changes in a company's or the broader economy's performance. When unemployment rises, the wages of those workers that remain employed tend to stay the same or grow at a slower rate than before rather than falling with the decrease in demand for labor. Specifically, wages are said to be "sticky-down" since they can move up easily but move down only with difficulty.
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