The Unconventional Views of Labor Market: Wage Rigidity as Told By Truman F. Bewley Survey  

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Lestano

Jenis: Article from Journal - ilmiah nasional - tidak terakreditasi DIKTI - atma jaya
Dalam koleksi: Jurnal Ekonomi dan Bisnis vol. 3 no. 1 (Feb. 2003), page 89-102.
Topik: Wage Rigidity; Morale; Motivation; Unemployment

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ100.3 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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The purpose of this paper is to explore the discussion of Truman F. Bewley survey on wage rigidity puzzle. First, it present briefly the source of wage rigidity explained by almost all of existing theories. The survey evidences reject nearly every existing model of employment and wages, except one that emphasize on the effect of pay cuts on morale, i.e., morale model of Robert M. Solow and gift exchange model of George A. Akerlof. The survey show that good morale and motivation play a key role in explaining (i) why are wages sticky? and (ii) why do not cut pays to avoid layoffs? The employers resist pay cuts largely because the savings from lower wages are usually outweighed by the cost of denting workers’ morale. Pay cuts strike workers’ standard of living, lower their confidence, and it also viewed as affront and unfair. Falling morale raises workers turnover and reduces their productivity, and in turn, it will negatively affect firms’ profit. Firms normally prefer layoffs to pay cuts since they damage morale less. Pay cuts hurt everyone and can cause anger. Layoffs hit morale only for a while, since the hurt have, after all, left. Whereas a generalized pay cut might make the best workers leave, and a selective one damage morale because it is seen as unfair, firms can often lay off their under performance workers. Pay cuts are more likely at firms whose demand for labor is price sensitive, such as those in highly competitive industries. While many markets are becoming more competitive, wages may also be getting more elastic and unemployment may escalate less in recessions. Wages are also likely to be less rigid in secondary labor market (short-term jobs), where workers do not feel their jobs as career. Conversely, since more workers now do jobs that are difficult to monitor, or in which they need to co-operate, share information, be creative or be nice to customers, and wages may turn out to be more rigid.

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