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Movements of wages over the business cycle: an intra-firm view

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Abstract

This paper tests the hypothesis that firms adjust to the business cycle by altering employment through promotion and hiring and holding the salary structure and salaries assigned to jobs relatively constant. Two comprehensive firm-level panel datasets are used to examine salary setting and worker movement within firms. The salary structure is found to be rigid whereas promotion rates are cyclically sensitive. In contrast to the hypothesis, wage cyclicality in these two firms is driven by changes in salaries associated with jobs rather than by worker movement. An additional finding is that salaries in the two firms are countercyclical.

Suggested Citation

  • Beth Anne Wilson, 1997. "Movements of wages over the business cycle: an intra-firm view," Finance and Economics Discussion Series 1997-1, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:1997-1
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    References listed on IDEAS

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    1. 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.
    2. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-257, July.
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    Cited by:

    1. Silke Anger, 2007. "The Cyclicality of Effective Wages within Employer-Employee Matches: Evidence from German Panel Data," SOEPpapers on Multidisciplinary Panel Data Research 34, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. Devereux, Paul J, 2000. "Task Assignment over the Business Cycle," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 98-124, January.
    3. Paul J. Devereux & Robert A. Hart, 2006. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
    4. Julio J. Rotemberg, 1998. "Cyclical Movements in Wages and Consumption in a Bargaining Model of Unemployment," NBER Working Papers 6445, National Bureau of Economic Research, Inc.
    5. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer–Employee Matches in a Rigid Labor Market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18(6), pages 786-797.

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