Cyclical labor costs within jobs

Citation

Schaefer D & Singleton C (2019) Cyclical labor costs within jobs. European Economic Review, 120, Art. No.: 103317. https://doi.org/10.1016/j.euroecorev.2019.103317

Abstract
Using UK employer-employee panel data, we present novel facts on how wages and working hours respond to the business cycle within jobs. Firms reacted to the Great Recession with substantial real wage cuts and by recruiting more part-time workers. A one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2.6% for new hires as well as for job stayers. Hiring hours worked were substantially procyclical, while job-stayer hours were acyclical. These results show that real wages are not rigid and that the labor costs of new hires are especially flexible.

Keywords
Wage rigidity; Great recession; Hours worked; Job-level analysis

Journal
European Economic Review: Volume 120