When there is a pressure on wages to increase at a slower pace than the increase in productivity, then there is said to be a downward pressure on wages. Thus, if productivity rising at the rate of 6 per cent while the wage rate is increasing by only 2 per cent, this will cause the labor cost per unit or output to fall by around 4 per cent. This decline in per unit of output to fall by around 4 per cent. This decline in per unit cost will cause a rightward (downward) shift in the SRAS curve. The rightward shifts in the SRAS curve thus shows the downward wage pressure coming from the labor market.
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