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Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain

Year: 2015

Type: article

Abstract: Using 1979–2012 CPS data for the United States and 1975–2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed.

Source: Journal of Labor Economics

DOI: 10.1086/682407

Authors: Michael W. L. Elsby, Donggyun Shin, Gary Solon

Institutions: University of Edinburgh, Kyung Hee University, National Bureau of Economic Research, University of Arizona

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funder: Economic and Social Research Council