Question

The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay

Answer 1

Adverse selection of wage cuts

Step-by-step explanation:

Adverse selection of wage cuts or Adverse selection in wages refers to the situation whereby there is adverserse selection in the labour market. Here the seller of labor is the worker, the buyer of labor is the employer.

It could occur where the worker or seller of labour has more information than the buyer, the employer, and thus tends to leave the organization when there is a wage cut because they know their productivity worth. It could also happen when the seller of labour has less information than the buyer and overestimates his worth.