Final answer:
A demotion can lead to a constructive dismissal claim. Firms might lay off or fire employees instead of making across-the-board wage cuts to avoid losing their best workers. Market pressure can influence discriminatory businesses to improve their practices.
Step-by-step explanation:
Among the options provided, a demotion could lead to a constructive dismissal claim by an employee. Constructive dismissal occurs when an employer makes a significant change to a fundamental term or condition of an employee's employment without the employee's consent, leading the employee to resign. Such changes may include a demotion, significant pay cut, or drastic change in job responsibilities.
In the context of employment law and market pressures, companies facing tough business conditions might be tempted to reduce wages across the board. However, the adverse selection of wage cuts argument suggests that this can lead to the best workers leaving for other firms that offer better pay, effectively causing a discriminatory business to lose valuable employees and potentially change its behavior.
Instead, employers might choose layoffs or firings to manage costs without harming overall wage levels. Persuading employees to take a short-term pay cut can sometimes work but is less common than layoffs.