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Insights gained from conversations with labor market decision makers

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Author Info
Truman F. Bewley () (Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281, USA.)
Abstract

I describe insights into wage dynamics and downward wage rigidity obtained from more than two hundred interviews with businesspeople, labor leaders, and various labor market intermediaries and made in the early 1990s in the Northeast of the United States. I explain the morale explanation for downward rigidity of the pay of existing employees and discuss what morale is, why businesspeople care about it, and why pay cuts damage it. I discuss the origin and nature of pay structures internal to an establishment, the relation between pay at different establishments, and why firms tend to lay off workers rather than cut pay. The findings of the study to be discussed are reported in detail in Truman Bewley, Why Wages Don’t Fall during a Recession. Cambridge, MA - Harvard University Press (1999). JEL Classification: E24, J31, J41.

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Paper provided by European Central Bank in its series Working Paper Series with number 776.

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Length: 30 pages
Date of creation: Jul 2007
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Handle: RePEc:ecb:ecbwps:20070776

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Related research
Keywords: Wage rigidity; wage determination.;

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References listed on IDEAS
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  1. Dees, S. & Holly, S. & Pesaran, M.H. & Smith, L.V., 2007. "Long Run Macroeconomic Relations in the Global Economy," Cambridge Working Papers in Economics 0703, Faculty of Economics, University of Cambridge. [Downloadable!]
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  2. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2007. "The cyclicality of consumption, wages and employment of the public sector in the euro area," Working Paper Series 757, European Central Bank. [Downloadable!]
  3. Michael Ehrmann & Marcel Fratzscher, 2007. "Explaining monetary policy in press conferences," Working Paper Series 767, European Central Bank. [Downloadable!]
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