“After all, after someone is laid off, what’s to keep them from being hired back at lower wages” — nothing in theory, but in the real world, plenty. This post is interesting, but to me it seems to be struggling to find resources within the standard idealizations of microeconomics (perfect information, rational decisions) to explain a phenomenon that depends on violations of those assumptions.
“After all, after someone is laid off, what’s to keep them from being hired back at lower wages” — nothing in theory, but in the real world, plenty. This post is interesting, but to me it seems to be struggling to find resources within the standard idealizations of microeconomics (perfect information, rational decisions) to explain a phenomenon that depends on violations of those assumptions.
The point is that wages have to be sticky for new hires to cause unemployment volatility.