Why Wages Don't Fall during a Recession

A DEEP QUESTION in economics is why wages and salaries don't fall during recessions.Although economists have posited many theories to account for wage rigidity, none is satisfactory.During the recession of the early 1990s, Truman Bewley explored the puzzle by interviewing over three hundred business executives and labor leaders as well as professional recruiters and advisors to the unemployed.Bewley's findings contradict most theories of wage rigidity and provide fascinating insights into the problems businesses face that prevent labor markets from clearing.