Book contents
- Frontmatter
- Contents
- Acknowledgments for Reprinted Articles
- Introduction
- The Theory of Underemployment in Densely Populated Backward Areas
- Another Possible Source of Wage Stickiness
- Equilibrium Unemployment as a Worker Discipline Device
- Involuntary Unemployment as a Principal-Agent Equilibrium
- Labor Contracts as Partial Gift Exchange
- A Model of the Natural Rate of Unemployment
- Job Queues and Layoffs in Labor Markets with Flexible Wages
- Hierarchy, Ability, and Income Distribution
- Incentives, Productivity, and Labor Contracts
- Work Incentives, Hierarchy, and Internal Labor Markets
Job Queues and Layoffs in Labor Markets with Flexible Wages
Published online by Cambridge University Press: 10 January 2011
- Frontmatter
- Contents
- Acknowledgments for Reprinted Articles
- Introduction
- The Theory of Underemployment in Densely Populated Backward Areas
- Another Possible Source of Wage Stickiness
- Equilibrium Unemployment as a Worker Discipline Device
- Involuntary Unemployment as a Principal-Agent Equilibrium
- Labor Contracts as Partial Gift Exchange
- A Model of the Natural Rate of Unemployment
- Job Queues and Layoffs in Labor Markets with Flexible Wages
- Hierarchy, Ability, and Income Distribution
- Incentives, Productivity, and Labor Contracts
- Work Incentives, Hierarchy, and Internal Labor Markets
Summary
Models of a heterogeneous labor market are presented in which a worker's acceptance wage is an increasing function of his ability, and in which firms have imprecise information concerning the labor endowment of particular workers. Because the expected labor endowment of a hiree is an increasing function of the firm's wage offer, industrial firms may choose not to lower wages when confronted with a queue of job applicants. Rejected job applicants will not be able to increase their probability of employment by lowering their acceptance wages. Firms may choose to simultaneously hire and fire workers.
In 1975, the administration of the Stanford Linear Accelerator Center (SLAC) declared its intention to lay off 10 percent of its work force. The workers then voted to take a 10 percent wage cut voluntarily to stop the layoffs. This offer was refused by the management of SLAC. The reason offered by SLAC was: if wages were cut, “the best workers would quit.”
Introduction
In traditional labor-market models, wages are determined solely by their role in equating supply and demand. These models have, therefore, been of little use in explaining the widely observed phenomenon of job queues and the related reality of layoffs accompanied by rigid wages. However, both phenomena can be explained if we make two critical assumptions: (1) the wages received by workers are not proportionate to their productivity, but (2) the acceptance wages of workers are an increasing function of their productivity.
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- Efficiency Wage Models of the Labor Market , pp. 102 - 114Publisher: Cambridge University PressPrint publication year: 1986
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