NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wage Adjustment in the Great Recession

Michael W. Elsby, Donggyun Shin, Gary Solon

NBER Working Paper No. 19478
Issued in September 2013
NBER Program(s):   EFG   LS   ME

Using 1979-2011 Current Population Survey data for the United States and 1975-2011 New Earnings Survey 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. U.S. distributions of year-to-year nominal wage change show many workers reporting zero change (suggesting wage stickiness) and many reporting nominal reductions (suggesting wage flexibility), but both findings could be distorted by reporting error. The British data, which are based on employers’ payroll records, show much lower prevalence of zero wage change, but still show surprisingly frequent nominal wage cuts. The complex constellation of empirical regularities defies explanation by simple theories.

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Document Object Identifier (DOI): 10.3386/w19478

Forthcoming: Wage Adjustment in the Great Recession, Michael W. L. Elsby, Donggyun Shin, Gary Solon. in The Labor Market in the Aftermath of the Great Recession, Mas and Card. 2014

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