Final answer:
The likely reason for a mass exodus of employees from a restaurant is the adverse selection of wage cuts, where skilled workers leave due to reduced wages during a recession, leaving behind less skilled workers with fewer job alternatives.
Step-by-step explanation:
The most likely explanation for a large number of employees quitting a local restaurant could be related to adverse selection of wage cuts. This economic theory suggests that if an employer reduces wages due to poor business conditions, the most skilled employees with better employment opportunities are likely to leave first. This phenomenon leaves the employer with less-skilled workers who have fewer job alternatives.
Such a situation often occurs during a recession when businesses might need to cut costs due to reduced consumer spending. In contrast, companies might opt to layoff workers instead of across-the-board wage cuts to prevent the loss of their best employees. The least attractive workers, with fewer alternatives, are more likely to stay, which could negatively impact the business's performance over time.
Employees might also leave if they become discouraged workers, losing faith in the opportunities the current job market offers. Furthermore, the dynamics of unemployment, including the frictional unemployment experienced during job transitions, play a role in how easily workers can find new employment.