Increasing Steepness of the Wage-Setting Curve at Low Unemployment
The aggregate wage-setting (WS) curve becomes steeper at lower levels of unemployment because the upward shift in an individual firm's no-shirking wage (NSW) curve is more pronounced in a tight labor market. For a given decrease in unemployment, the resulting wage competition among firms is more intense than it would be at higher unemployment levels. This intensified competition forces firms to implement larger wage increases to retain and motivate workers, causing a greater upward shift in their NSW curves. Consequently, the aggregate wage level rises more sharply, resulting in a steeper WS curve.
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Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
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Increasing Steepness of the Wage-Setting Curve at Low Unemployment
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