IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Explaining Changes in Earnings and Labour Costs During the Recession

  • Bergin, Adele
  • Kelly, Elish
  • McGuinness, Seamus

This paper utilises data from the National Employment Surveys to analyse movements in both earnings and labour costs during the period 2006 through to 2009. It finds that, despite an unprecedented fall in output and rise in unemployment, both average earnings and average labour costs increased marginally over the period. Although some factors, such as a rise in the incidence of part-time working and falls in construction employment, served to depress wages, these influences were more than outweighed by increases in both the share of and returns to graduate employment and a rising return to large firm employment. This analysis suggests that a good deal of the downward wage rigidity observed within Irish private sector employment since the onset of the recession has largely been driven by factors consistent with continued productivity growth. Nevertheless, particularly within the male labour market, a substantial proportion of the movements in wages cannot be explained by changes in either labour market composition or the returns to individual/job characteristics. The large unexplained component in the data is attributed to a general reluctance of firms to cut wages in order to avoid productivity losses associated with worker dissatisfaction or higher rates of labour turnover. In support of this view, the study demonstrates that firms will adopt strategies such as reducing staff numbers, hours worked and bonus payments, in preference to reducing wages.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number EC9.

in new window

Date of creation: Apr 2012
Date of revision:
Handle: RePEc:esr:wpaper:ec9
Contact details of provider: Postal:
Whitaker Square, Sir John Rogerson's Quay, Dublin 2

Phone: (353-1) 863 2000
Fax: (353-1) 863 2100
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Messina, Julián & Du Caju, Philip & Izquierdo, Mario & Duarte, Cláudia Filipa & Hansen, Niels Lynggård, 2010. "The incidence of nominal and real wage rigidity: an individual-based sectoral approach," Working Paper Series 1213, European Central Bank.
  2. Giuseppe Bertola & Aurelijus Dabusinskas & Marco Hoeberichts & Mario Izquierdo & Claudia Kwapil & Jeremi Montornès & Daniel Radowski, 2010. "Price, wage and employment response to shocks: evidence from the WDN Survey," Working Papers 1006, Banco de España;Working Papers Homepage.
  3. Jan Babecky & Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Room, 2009. "Downward nominal and real wage rigidity : Survey evidence from European firms," Working Paper Research 182, National Bank of Belgium.
  4. Jan Babecky & Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Room, 2009. "The margins of labour cost adjustment : Survey evidence from European firms," Working Paper Research 183, National Bank of Belgium.
  5. Kelly, Elish & McGuinness, Seamus & O'Connell, Philip J., 2008. "Benchmarking, Social Partnership and Higher Remuneration: Wage Settling Institutions and the Public-Private Sector Wage Gap in Ireland," Papers WP270, Economic and Social Research Institute (ESRI).
  6. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  7. Du Caju, Philip & Kosma, Theodora & Lawless, Martina & Messina, Julián & Rõõm, Tairi, 2013. "Why Firms Avoid Cutting Wages: Survey Evidence from European Firms," Research Technical Papers 03/RT/13, Central Bank of Ireland.
  8. Ugidos Olazabal, Arantza & Gardeazabal, Javier, 2002. "More on Identification on Detailed Wage Decompositions," DFAEII Working Papers 2002-17, University of the Basque Country - Department of Foundations of Economic Analysis II.
  9. Catherine Fuss, 2008. "How do firms adjust their wage bill in Belgium ? A decomposition along the intensive and extensive margins," Working Paper Research 127, National Bank of Belgium.
  10. Barrett, Alan & Kearney, Ide & Goggin, Jean & Conefrey, Thomas, 2010. "Quarterly Economic Commentary, Summer 2010," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20102.
  11. Lindbeck, Assar & Snower, Dennis J, 1988. " Job Security, Work Incentives and Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(4), pages 453-74.
  12. Christopoulou, Rebekka & Jimeno, Juan F. & Lamo, Ana, 2010. "Changes in the wage structure in EU countries," Working Paper Series 1199, European Central Bank.
  13. Barrett, Alan & Kearney, Ide & Goggin, Jean, 2009. "Quarterly Economic Commentary, Summer 2009," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20092.
  14. McCoy, Daniel & Duffy, David & Bergin, Adele & Eakins, John & MacCoille, C, 2002. "Quarterly Economic Commentary, Summer 2002," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20022.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:ec9. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarah Burns)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.