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

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Listed author(s):
  • Anger, Silke

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 pay, 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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File URL: https://www.econstor.eu/bitstream/10419/68597/1/Anger_2011_Cycliality-Effective-Wages.pdf
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Article provided by ZBW - German National Library of Economics in its journal EconStor Open Access Articles.

Volume (Year): (2011-12)
Issue (Month): ()
Pages: 786-797

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Handle: RePEc:zbw:espost:68597
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Keywords: Real wage cyclicality; Effective wages; Unpaid overtime; Bonus payments; Firm stayers;

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Find related papers by JEL classification:
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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Cited by:

  1. Peng, Fei & Anwar, Sajid & Kang, Lili, 2017. "New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe," Economic Modelling, Elsevier, vol. 64(C), pages 1-19.
  2. Balazs Reizer, 2016. "Do Firms Pay Bonuses to Protect Jobs?," IEHAS Discussion Papers 1612, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Christian Pfeifer, 2015. "Effective working hours and wages: the case of downward adjustment via paid absenteeism," Economics Bulletin, AccessEcon, vol. 35(1), pages 612-626.
  4. Boris Hirsch & Thomas Zwick, 2015. "How Selective Are Real Wage Cuts? A Micro-analysis Using Linked Employer–Employee Data," LABOUR, CEIS, vol. 29(4), pages 327-347, December.
  5. Yongsung Chang & Sun-Bin Kim & Mark Bils, 2013. "How Sticky Wages in Existing Jobs can affect Hiring," 2013 Meeting Papers 1162, Society for Economic Dynamics.
  6. Kang, Lili & Peng, Fei, 2012. "Selection and Real wage cyclicality: Germany Case," MPRA Paper 42452, University Library of Munich, Germany.
  7. Verdugo, Gregory, 2016. "Real wage cyclicality in the Eurozone before and during the Great Recession: Evidence from micro data," European Economic Review, Elsevier, vol. 82(C), pages 46-69.
  8. Ad hoc team of the European System of Central Banks & Anderton, Robert & Jarvis, Valerie & Szörfi, Béla & Périnet, Mathilde & Petroulas, Pavlos & Bonthuis, Boele & Beck Nelleman, Peter & Conefrey, Tho, 2015. "Comparisons and contrasts of the impact of the crisis on euro area labour markets," Occasional Paper Series 159, European Central Bank.
  9. Stüber, Heiko & Snell, Andy, 2014. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Evidence from Germany," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100601, Verein für Socialpolitik / German Economic Association.
  10. 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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