Wage compression

I wrote this paragraph two days ago:

Employers also may give workers raises at a slower rate; this is called “wage compression.”  If it is hard to cut wages, wait and make sure the worker really deserves a pay increase. Wages will lag productivity, but the net result is fewer situations where a direct wage cut is necessary.

The implication of course is that low unemployment, and a stable macroeconomy, will mean that wages lag behind productivity.  Here is my earlier post on wage compression.


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