Final answer:
Sticky wages can lead to unemployment when employees' pay is above the range maximum. An example of a pay schedule is the U.S. Federal General Schedule, which sets salary ranges based on different levels (grades) of positions and ranks (steps) of seniority.
Step-by-step explanation:
In the labor market, there can be situations where employees' pay is above the range maximum. This is known as sticky wages. Sticky wages refer to the phenomenon where wages are resistant to change, particularly downward, despite changes in the supply and demand of labor.
When employees' pay is above the range maximum, it can lead to unemployment. In the labor market, if the wage rate is stuck above the equilibrium, the number of individuals seeking jobs (Qs) can be greater than the number of job openings (Qd), resulting in unemployment.
One example of pay scales in which employees' pay can be above the range maximum is the U.S. Federal General Schedule, which sets salary ranges based on different levels (grades) of positions and ranks (steps) of seniority. Civil servants receive pay based on this schedule, which includes fifteen grades, each with ten steps.