Are Nominal Wage Changes Skewed Away From Wage Cuts?

  • Kenneth J. McLaughlin
  • Published 1999


Real-wage cuts are much more common than nominal wage cuts. Why? By definition, real cuts must be more common if inflation is positive. Yet there might be more to it. Perhaps workers suffer from money illusion. Maybe managers cannot cut pay in nominal terms, but they can cut real wages. As a result, a low-inflation economy might be a high unemployment… (More)


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