Why wages are sticky

Bloomberg: Greek unions grounded flights, kept ferries docked at ports and shut down public services today to protest wage cuts as the government sticks to conditions of an international bailout. Protesters clashed with police in Athens.

Air-traffic controllers walked off the job, canceling all flights to and from Athens International Airport. Public transport workers, whose salaries were cut 10 percent under a bill approved early today in parliament, worked on and off between 9 a.m. and 5 p.m. to carry protesters to rallies.

…Other groups taking part in today’s strike include bank employees, doctors, teachers and employees from state-controlled Public Power Corp., which supplies electricity in the country of 11 million people. Taxi drivers turned off their engines from 10 a.m. to 2 p.m.

Bus, train and subway workers plan a 24-hour strike tomorrow, the third in a week since plans to decrease their wages were approved by the cabinet…

The story also illustrates how aggregate demand shocks can generate aggregate supply shocks.


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