Wage Flexibility

Wage Flexibility

The extent to which wages and salaries can rise or fall due to rising or falling profits. That is, a company or economy has wage flexibility if, when times are good, it provides employees raises but has the ability to impose cuts when times are difficult. Proponents of wage flexibility contend that it leads to lower unemployment because employers can cut wages instead of jobs. Critics, however, contend that it leads to lower financial security among workers.