IDEAS home Printed from https://ideas.repec.org/a/wly/jmoncb/v54y2022is1p89-111.html
   My bibliography  Save this article

The Importance of the Part‐Time and Participation Margins for Real Wage Adjustment

Author

Listed:
  • MARY C. DALY
  • BART HOBIJN

Abstract

We introduce a decomposition of the growth in real median usual weekly earnings of full‐time wage and salary earners into parts due to earnings increases of those who remain employed, the intensive margin, and due to changes in those who are employed, the extensive margin. The intensive margin is procyclical and dominates during expansions. The extensive margin is countercyclical and important during downturns, especially during the Great and COVID Recessions. The extensive margin is mainly driven by entries from and exits to part‐time employment and nonparticipation, not unemployment.

Suggested Citation

  • Mary C. Daly & Bart Hobijn, 2022. "The Importance of the Part‐Time and Participation Margins for Real Wage Adjustment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(S1), pages 89-111, February.
    • Handle: RePEc:wly:jmoncb:v:54:y:2022:i:s1:p:89-111
    DOI: 10.1111/jmcb.12895
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jmcb.12895
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jmcb.12895?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
    2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    3. Mark Gertler & Christopher Huckfeldt & Antonella Trigari, 2020. "Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires," Review of Economic Studies, Oxford University Press, vol. 87(4), pages 1876-1914.
    4. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2007. "How Wages Change: Micro Evidence from the International Wage Flexibility Project," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 195-214, Spring.
    5. Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2011. "Investment Shocks and the Relative Price of Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 101-121, January.
    6. Mary C. Daly & Bart Hobijn, 2014. "Downward Nominal Wage Rigidities Bend the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 51-93, October.
    7. 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.
    8. Lebow David E & Saks Raven E & Wilson Beth Anne, 2003. "Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-30, October.
    9. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    10. Paul J. Devereux, 2001. "The Cyclicality of Real Wages within Employer-Employee Matches," ILR Review, Cornell University, ILR School, vol. 54(4), pages 835-850, July.
    11. Kudlyak, Marianna, 2014. "The cyclicality of the user cost of labor," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 53-67.
    12. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    13. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-689, August.
    14. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    15. Marcus Hagedorn & Iourii Manovskii, 2013. "Job Selection and Wages over the Business Cycle," American Economic Review, American Economic Association, vol. 103(2), pages 771-803, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard K. Crump & Stefano Eusepi & Marc Giannoni & Ayşegül Şahin, 2022. "The Unemployment-Inflation Trade-off Revisited: The Phillips Curve in COVID Times," NBER Working Papers 29785, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Basu, S. & House, C.L., 2016. "Allocative and Remitted Wages," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 297-354, Elsevier.
    2. Mary C. Daly & Bart Hobijn, 2016. "The intensive and extensive margins of real wage adjustment," Working Paper Series 2016-4, Federal Reserve Bank of San Francisco.
    3. Andrew Snell & Heiko Stuber & Jonathan Thomas, 2018. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Theory and Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 265-284, October.
    4. Lydon, Reamonn & Lozej, Matija, 2018. "Flexibility of new hires’ earnings in Ireland," Labour Economics, Elsevier, vol. 53(C), pages 112-127.
    5. Mary C. Daly & Bart Hobijn & Theodore S. Wiles, 2011. "Aggregate Real Wages: Macro Fluctuations and Micro Drivers," Tinbergen Institute Discussion Papers 11-158/3, Tinbergen Institute.
    6. Grace Weishi Gu & Eswar Prasad & Thomas Moehrle, 2020. "New Evidence on Cyclical Variation in Average Labor Costs in the United States," The Review of Economics and Statistics, MIT Press, vol. 102(5), pages 966-979, December.
    7. Merkl, Christian & Stüber, Heiko, 2024. "Wage and employment cyclicalities at the establishment level," European Economic Review, Elsevier, vol. 161(C).
    8. Bauer, Anja & Lochner, Benjamin, 2020. "History dependence in wages and cyclical selection: Evidence from Germany," Labour Economics, Elsevier, vol. 67(C).
    9. Gu, Grace Weishi & Prasad, Eswar, 2018. "New Evidence on Cyclical Variation in Labor Costs in the U.S," IZA Discussion Papers 11311, Institute of Labor Economics (IZA).
    10. Emmanuel Saez & Pascal Michaillat, 2013. "A Theory of Aggregate Supply and Aggregate Demand as Functions of Market Tightness with Prices as Parameters," 2013 Meeting Papers 1216, Society for Economic Dynamics.
    11. John Grigsby & Erik Hurst & Ahu Yildirmaz, 2021. "Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data," American Economic Review, American Economic Association, vol. 111(2), pages 428-471, February.
    12. Susanto Basu & Christopher L. House, 2016. "Allocative and Remitted Wages: New Facts and Challenges for Keynesian Models," NBER Working Papers 22279, National Bureau of Economic Research, Inc.
    13. Hazell, Jonathon & Taska, Bledi, 2023. "Downward Rigidity in the Wage for New Hires," IZA Discussion Papers 16512, Institute of Labor Economics (IZA).
    14. Jonathon Hazell & Bledi Taska, 2020. "Downward Rigidity in the Wage for New Hires," Discussion Papers 2028, Centre for Macroeconomics (CFM).
    15. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2020. "Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry," IZA Discussion Papers 13542, Institute of Labor Economics (IZA).
    16. Simon Jäger & Benjamin Schoefer & Samuel Young & Josef Zweimüller, 2020. "Wages and the Value of Nonemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 1905-1963.
    17. Verdugo, Gregory, 2016. "Real wage cyclicality in the Eurozone before and during the Great Recession: Evidence from micro data," European Economic Review, Elsevier, vol. 82(C), pages 46-69.
    18. Daniel Schaefer & Carl Singleton, 2023. "The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 60-76, December.
    19. Galindo da Fonseca, João Alfredo & Gallipoli, Giovanni & Yedid-Levi, Yaniv, 2020. "Match quality and contractual sorting," Labour Economics, Elsevier, vol. 66(C).
    20. Martins, Pedro S. & Solon, Gary & Thomas, Jonathan P., 2010. "Measuring What Employers Really Do about Entry Wages over the Business Cycle," IZA Discussion Papers 4757, Institute of Labor Economics (IZA).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jmoncb:v:54:y:2022:i:s1:p:89-111. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.