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New Measures of Labor Cost: Implications for Demand Elasticities and Nominal Wage Growth

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  • Daniel S. Hamermesh

Abstract

This study develops alternative quarterly measures of labor costs that refine the published data on hourly earnings and hourly compensation for the period 1953-1978. These new series account for deviations of hours paid for from hours worked, for the tax treatment of wages under the corporate income tax, and for variations in the user cost of training. They generally produce somewhat higher elasticities of labor demand, and explain variations in employment over time slightly better than do the published series. They also provide a different view of the recent path of wage inflation in the United States, suggesting that nominal wage growth has been more responsive to variations in the rate of price inflation than the published labor-cost series indicate. A data appendix lists the values of these new series; one series (that which adjusts for the hours paid/hours worked distinction) can be updated with readily avail- able data by persons interested in using these more appropriate measures of the cost of labor facing employers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0821.

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Date of creation: Dec 1981
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Publication status: published as Hamermesh, Daniel S. "New Measures of Labor Cost: Implications for Demand Elasticities and Nominal Wage Growth." The Measurement of Labor Cost, editedby Jack E. Triplett. Chicago: University of Chicago Press, (October 1983), pp. 287-305, 521-527.
Handle: RePEc:nbr:nberwo:0821

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  1. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
  2. Rosen, Harvey S & Quandt, Richard E, 1978. "Estimation of a Disequilibrium Aggregate Labor Market," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 371-79, August.
  3. Chinloy, Peter T, 1980. "Sources of Quality Change in Labor Input," American Economic Review, American Economic Association, vol. 70(1), pages 108-19, March.
  4. Kim B. Clark & Richard B. Freeman, 1979. "How Elastic is The Demand for Labor?," NBER Working Papers 0309, National Bureau of Economic Research, Inc.
  5. Altonji, Joseph & Ashenfelter, Orley, 1980. "Wage Movements and the Labour Market Equilibrium Hypothesis," Economica, London School of Economics and Political Science, vol. 47(187), pages 217-45, August.
  6. Hamermesh, Daniel S, 1995. "Labour Demand and the," Economic Journal, Royal Economic Society, vol. 105(430), pages 620-34, May.
  7. Solow, Robert M, 1980. "On Theories of Unemployment," American Economic Review, American Economic Association, vol. 70(1), pages 1-11, March.
  8. Grubb, David B & Jackman, Richard A & Layard, Richard G, 1982. "Causes of the Current Stagflation," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 707-30, Special I.
  9. Frank Brechling, 1981. "Layoffs and Unemployment Insurance," NBER Chapters, in: Studies in Labor Markets, pages 187-208 National Bureau of Economic Research, Inc.
  10. Chirinko, Robert S, 1980. "The Real Wage Rate over the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 459-61, August.
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Cited by:
  1. Timothy Dunne & Mark J Roberts, 1993. "The Long-Run Demand for Labor: Estimates From Census Establishment Data," Working Papers 93-13, Center for Economic Studies, U.S. Census Bureau.
  2. Glosser, Stuart M. & Golden, Lonnie, 1997. "Average work hours as a leading economic variable in US manufacturing industries," International Journal of Forecasting, Elsevier, vol. 13(2), pages 175-195, June.
  3. Matthew J. Slaughter, 1997. "International Trade and Labor-Demand Elasticities," NBER Working Papers 6262, National Bureau of Economic Research, Inc.
  4. Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, vol. 54(1), pages 27-56, June.

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