If firms have a hard time filling openings what will happen to real wages?

Expert Answers info

pohnpei397 eNotes educator | Certified Educator

calendarEducator since 2009

write35,413 answers

starTop subjects are History, Literature, and Social Sciences

If firms have a hard time filling job openings, wages will typically rise.  However, it is not completely clear that real wages will rise as well.

If firms have a hard time filling job openings, it is typically because there is more demand for workers than there is supply.  In such a case, wages rise.  However, it is not clear if real wages will rise.  This is because an increase in wages will cause inflation.  As inflation rises, the real value of wages goes down.

Classical economists argue that real wages will only rise in the long term if there is an increase in aggregate supply, not simply a rise in the demand for labor.

check Approved by eNotes Editorial

Unlock This Answer Now