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Cyclical labor costs within jobs

Author

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  • Daniel Schaefer

    (School of Economics, University of Edinburgh)

  • Carl Singleton

    (Department of Economics, University of Reading)

Abstract

Using UK employer-employee panel data, we present novel facts on how wages and working hours respond to the business cycle within jobs. Firms reacted to the Great Recession with substantial real wage cuts and by recruiting more part-time workers. A one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2.6 percent for new hires as well as for job stayers. Hiring hours worked were substantially procyclical, while job-stayer hours were acyclical. These results show that real wages are not rigid and that the labor costs of new hires are especially flexible.

Suggested Citation

  • Daniel Schaefer & Carl Singleton, 2019. "Cyclical labor costs within jobs," Economics Discussion Papers em-dp2019-03, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2019-03
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    File URL: http://www.reading.ac.uk/web/FILES/economics/emdp201903.pdf
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    References listed on IDEAS

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    Cited by:

    1. Daniel Schaefer & Carl Singleton, 2020. "Nominal Wage Adjustments and the Composition of Pay: New Evidence from Payroll Data," Economics Discussion Papers em-dp2020-01, Department of Economics, University of Reading.
    2. Jonathon Hazell & Bledi Taska, 2020. "Downward Rigidity in the Wage for New Hires," Discussion Papers 2028, Centre for Macroeconomics (CFM).
    3. Choi, Sekyu & Figueroa, Nincen & Villena-Roldán, Benjamin, 2020. "Wage Cyclicality Revisited: The Role of Hiring Standards," MPRA Paper 98240, University Library of Munich, Germany.
    4. David N. F. Bell & Robert A. Hart, 2023. "The decline of paid overtime working in Britain," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 235-258, June.
    5. Carreño, José Gabo & Uras, Burak, 2024. "Macro welfare effects of flexible labor contracts," European Economic Review, Elsevier, vol. 161(C).
    6. Merkl, Christian & Stüber, Heiko, 2024. "Wage and employment cyclicalities at the establishment level," European Economic Review, Elsevier, vol. 161(C).
    7. Carreño Bustos, José Gabo, 2023. "Flexible Contracts as Business Cycle Stabilizers," Discussion Paper 2023-007, Tilburg University, Center for Economic Research.

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    More about this item

    Keywords

    Wage rigidity; Great Recession; Hours worked; Job-level analysis;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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