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National Wage Setting

Author

Listed:
  • Jonathon Hazell

    (London School of Economics (LSE)
    Centre for Macroeconomics (CFM))

  • Christina Patterson

    (University of Chicago Booth School of Business
    National Bureau of Economic Research (NBER))

  • Heather Sarsons

    (University of Chicago Booth School of Business
    National Bureau of Economic Research (NBER))

  • Bledi Taska

    (Burning Glass Technologies)

Abstract

How do firms set wages across space? Using vacancy data with detailed job-level information supplemented with a survey of HR managers and self-reported data on workers’ wages, we show that, within the firm, 30-40% of posted wages for a given job are identical across space. Compared to differences between firms, nominal posted wages within the firm vary relatively little with local prices, a pattern that is present for realized wages as well. Using the pass-through of local shocks to wages in other locations of the firm, we argue that the limited variation of wages within firms is due to national wage setting, meaning that firms choose rigid pay structures in which they set very similar nominal wages for the same job in different regions. Our survey suggests that one reason firms set wages nationally is that nominal, rather than real, wage comparisons matter to workers.

Suggested Citation

  • Jonathon Hazell & Christina Patterson & Heather Sarsons & Bledi Taska, 2021. "National Wage Setting," Discussion Papers 2203, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:2203
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    File URL: https://www.lse.ac.uk/CFM/assets/pdf/CFM-Discussion-Papers-2022/CFMDP2022-03-Paper.pdf
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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