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Movements of Wages over the Business Cycle: An Intra-Firm View

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Abstract

This paper tests the hypothesis that firms adjust to the business cycle by altering employment through promotion and hiring and holding the salary structure and salaries assigned to jobs relatively constant. Two comprehensive firm-level panel datasets are used to examine salary setting and worker movement within firms. The salary structure is found to be rigid whereas promotion rates are cyclically sensitive. In contrast to the hypothesis, wage cyclicality in these two firms is driven by changes in salaries associated with jobs rather than by worker movement. An additional finding is that salaries in the two firms are countercyclical.

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  • Beth Anne Wilson, "undated". "Movements of Wages over the Business Cycle: An Intra-Firm View," Finance and Economics Discussion Series 1997-01, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    • Handle: RePEc:fip:fedgfe:1997-01
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    File URL: http://www.federalreserve.gov/pubs/feds/1997/199701/199701pap.pdf
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    References listed on IDEAS

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    1. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 1-25.
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    6. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
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    Keywords

    Wage cyclicality; firm-level data;

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