Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data

Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. We first show that per-period contract (``base'') wages are a large share of compensation and are more persistent than bonuses suggesting that base wages may be a better proxy for allocative wages than average hourly earnings. Nominal base wage declines are much rarer than previously thought with only 2\% of job-stayers receiving a nominal base wage cut during a given year. However, accounting for shifts in nominal wages of job-changers implies that \textit{aggregate} nominal wages are more flexible than the base nominal wages of job-stayers. Other forms of compensation, such as bonuses, work similarly to sales in the output price literature, and provide a margin of short-run adjustment which may be important for earnings dynamics and for financially constrained firms. In addition, nominal wage adjustments are state-dependent: downward aggregate nominal wage adjustments were much more common during the Great Recessions than in the subsequent recovery period, and these downward adjustments were concentrated in industries hit hardest by the recession and in shrinking firms. Finally, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Collectively, our results can be used to discipline models of worker nominal wage adjustments and models of wage rigidity.