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The Cyclicality of Effective Wages within Employer-Employee Matches in a Rigid Labor Market

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  • Anger, Silke

    ()
    (Institute for Employment Research (IAB), Nuremberg)

Abstract

This study analyzes real wage cyclicality for male full-time workers within employer-employee matches in Germany over the period 1984-2004. Five different wage measures are compared: the standard hourly wage rate; hourly wage earnings including overtime and bonus pay; the effective wage, which takes into account unpaid overtime; and monthly earnings, with and without additional pay. None of the hourly wage measures exhibits cyclicality except for the group of salaried workers with unpaid overtime. Their effective wages show a strongly procyclical reaction to changes in unemployment. Despite acyclical wage rates, salaried workers without unpaid overtime experienced procyclical earnings movements if they had income from extra pay. Monthly earnings were also procyclical for hourly paid workers with overtime pay. These findings suggest that cyclical earnings movements are generated by variable pay components, such as bonuses and overtime, and by flexible working hours. The degree of earnings procyclicality revealed for the German labor market is comparable to the United States.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5489.

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Length: 42 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5489

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Keywords: bonus payments; unpaid overtime; effective wages; real wage cyclicality; firm stayers;

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Cited by:
  1. Hirsch, Boris & Zwick, Thomas, 2013. "How selective are real wage cuts? A micro-analysis using linked employer-employee data," Discussion Papers 88, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  2. Yongsung Chang & Sun-Bin Kim & Mark Bils, 2013. "How Sticky Wages in Existing Jobs can affect Hiring," 2013 Meeting Papers, Society for Economic Dynamics 1162, Society for Economic Dynamics.
  3. Kang, Lili & Peng, Fei, 2012. "Selection and Real wage cyclicality: Germany Case," MPRA Paper 42452, University Library of Munich, Germany.
  4. Ueno, Yuko, 2014. "Size-specific Effects in Job Reallocation and Worker Mobility: Japan’s Experience from the 1990s," CIS Discussion paper series 624, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.

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