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What We Know About Wage Adjustment During the 2007-09 Recession and Its Aftermath

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  • Kudlyak, Marianna

    (Federal Reserve Bank of Richmond)

Abstract

Aggregate wage growth has remained flat during the 2007-09 recession and its aftermath while unemployment has exhibited substantial swings. Does the low real aggregate wage growth during the recovery indicate a weak labor market beyond what is measured by the official unemployment rate? Aggregate wage growth reflects actual changes of workers' wages, changes in the composition of workers, and changes in the composition of jobs. Some of these changes are related to underlying structural trends in the economy while others constitute the economy's response to the business cycle shocks and are more indicative of cyclical resource utilization in the labor market. Consequently, it is important to look beyond the aggregate statistics to understand the behavior of real wages and its relation to the health of the labor market. In this article, we review recent literature that studies the changes in the components of the aggregate wage over time and, specifically, after the 2007-09 recession.

Suggested Citation

  • Kudlyak, Marianna, 2015. "What We Know About Wage Adjustment During the 2007-09 Recession and Its Aftermath," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 225-244.
  • Handle: RePEc:fip:fedreq:00037
    DOI: 10.21144/eq1010302
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    File URL: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2015/q3/pdf/kudlyak.pdf
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    References listed on IDEAS

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    1. Nir Jaimovich & Henry E. Siu, 2012. "The Trend is the Cycle: Job Polarization and Jobless Recoveries," NBER Working Papers 18334, National Bureau of Economic Research, Inc.
    2. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
    3. McLaughlin, Kenneth J & Bils, Mark, 2001. "Interindustry Mobility and the Cyclical Upgrading of Labor," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 94-135, January.
    4. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
    5. Edward P. Lazear & Kathryn L. Shaw & Christopher Stanton, 2013. "Making Do With Less: Working Harder during Recessions," NBER Chapters,in: Labor Markets in the Aftermath of the Great Recession, pages 333-360 National Bureau of Economic Research, Inc.
    6. Steven J. Davis & John Haltiwanger, 2014. "Labor Market Fluidity and Economic Performance," NBER Working Papers 20479, National Bureau of Economic Research, Inc.
    7. 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.
    8. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    9. Pedro S. Martins & Gary Solon & Jonathan P. Thomas, 2012. "Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 36-55, October.
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    11. Mustre-del-Rio, Jose, 2014. "Following the leaders: wage growth of job switchers," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-2, Dec 19.
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