[Related to the Apply the Concept on page 448] Economists Mary Daly, Bart Hobijn, and Timothy Ni of the Federal
Reserve Bank of San Francisco argued that “employers hesitate to reduce wages and workers are reluctant to accept
wage cuts, even during recessions.” If a firm faces declining sales during a recession, why might the firm’s managers decide to lay off some workers and freeze the wages of
other workers rather than cut workers’ nominal wages?
Source: Mary C. Daly, Bart Hobijn, and Timothy Ni, “The Path
of Wage Growth and Unemployment,” Federal Reserve Bank of San
Francisco Economic Letter, July 15, 2013.