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Nominal Wage Adjustments during the Pandemic Recession

Author

Listed:
  • John Grigsby
  • Erik Hurst
  • Ahu Yildirmaz
  • Yulia Zhestkova

Abstract

In this paper, we show that the pandemic recession has led to frequent cuts in nominal wages. Within three months in 2020, as many wage cuts had occurred as occurred throughout the Great Recession. Unlike employment declines, wage cuts were concentrated at the top of the wage distribution. However, these cuts have been relatively short lived, particularly among high earners. Finally, wage cuts have been concentrated in firms that have seen large employment declines. Wage cuts appear not to be a substitute for cutting employment, at least when the shock to labor demand is this large.

Suggested Citation

  • John Grigsby & Erik Hurst & Ahu Yildirmaz & Yulia Zhestkova, 2021. "Nominal Wage Adjustments during the Pandemic Recession," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 258-262, May.
    • Handle: RePEc:aea:apandp:v:111:y:2021:p:258-62
    DOI: 10.1257/pandp.20211056
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    Citations

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    Cited by:

    1. Sugata Marjit & Gouranga Gopal Das, 2021. "Contact-Intensity, Collapsing Entertainment Sector and Wage Inequality: A Finite Change Model of Covid-19 Impact," CESifo Working Paper Series 9311, CESifo.
    2. Consolo, Agostino & Petroulakis, Filippos, 2022. "Did COVID-19 induce a reallocation wave?," Working Paper Series 2703, European Central Bank.
    3. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2022. "Earnings shocks and stabilization during COVID-19," Journal of Public Economics, Elsevier, vol. 206(C).
    4. Yu Pang, 2022. "A theory of fiscal policy response to an epidemic," Health Economics, John Wiley & Sons, Ltd., vol. 31(9), pages 2050-2071, September.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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