Final answer:
Wage inflexibility in labor markets stems from wage contracts and legal minimum wage laws, which prevent wages from decreasing even during economic downturns. While part-time employment and hourly scheduling offer flexibility, they do not inherently contribute to wage stickiness. This inflexibility can lead to adverse effects like unemployment.
Step-by-step explanation:
The sources of wage inflexibility involve various economic laws, practices, and institutions. Notably, wage contracts and legal minimum wage laws are key reasons wages might be resistant to downward movements. Wage contracts often involve negotiated terms between employers and employees, or more commonly, unions, which can lead to stipulations on the minimum wage workers are to receive. Downsizing wages could cause legal issues or disputes such as strikes. Furthermore, for low-skilled workers on minimum wage, it is not only unfair but also illegal to reduce their wages, resulting in wage inflexibility.
Part-time employment and hourly employee scheduling do not inherently cause wage inflexibility but rather represent variable work patterns. Part-time and younger workers often have more flexible hours and can adjust their work time in response to wage increases or decreases. This contrasts with full-time workers, whose work hours tend to be fixed by both their choice and employer's practices, showing an inelastic labor supply curve.
Understanding the complexities of wage stickiness is fundamental in analyzing labor market dynamics and examining potential implications such as unemployment, which can arise from wage inflexibility.