What happens to the survivors of an epidemic? What happens to their standard of living? When the labour supply is sharply reduced, we expect wages to increase. Any increase in money wages (or nominal wages) will have to be weighed against changes in the cost of living. If prices are rising faster than the nominal wage increase, workers will actually be worse off. Workers need to know what their nominal wage increase means in real terms. (The real wage is the nominal wage adjusted for inflation.)
real wages, nominal wages, inflation, game theory, bargaining power, labour market
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