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sticky wages

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Consider a proposal requiring all employers to provide each worker with health insurance. if a proposal would require all employers to give each worker health insurance, and as a result employeers costs increased by 5,000 and workers value these benefits by 15,000. therefore there will be lower monetary wages, firms will pay less total compensation, and employeement will rise - however what will happen if the market is characterized by sticky wages?

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Solution Summary

The term, sticky wages, is defined.

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The initial proposal and the resulting changes occur because the market was able to respond to the changes that were suggested without facing any difficulties. The variables were flexible in response to the proposed changes. As a result of the workers valuing the benefits, changes were able to be made whereby lower monetary wages were acceptable because of the trade-off with increased benefits -- health ...

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