Sticky wages

Definition

Sticky wages refer to the phenomenon where wages are slow to adjust in response to changes in economic conditions, such as inflation or changes in the demand for labor. This can lead to a situation where nominal wages remain constant even though there may be changes in the real wage rate.

Related terms

Inflation: Inflation refers to the general increase in prices over time, which reduces the purchasing power of money.

Real wage rate: The real wage rate represents the purchasing power of nominal wages adjusted for changes in prices or inflation.

Nominal wages: Nominal wages are the actual dollar amount paid to workers without accounting for changes in purchasing power due to inflation.