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Cyclical labor costs within jobs

Author

Listed:
  • 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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    Cited by:

    1. Daniel Schaefer & Carl Singleton, 2023. "The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 60-76, December.
    2. Tomas Key & Jamie Lenney, 2024. "The Impact of Aggregate Fluctuations Across the UK Income Distribution," Discussion Papers 2430, Centre for Macroeconomics (CFM).
    3. Forth, John & Bryson, Alex & Phan, Van & Ritchie, Felix & Singleton, Carl & Stokes, Lucy & Whittard, Damian, 2024. "Revisiting Sample Bias in the UK's Annual Survey of Hours and Earnings, with Implications for Estimates of Low Pay and the Bite of the National Living Wage," IZA Discussion Papers 17291, IZA Network @ LISER.
    4. Sekyu Choi & Benjamin Villena-Roldan & Nincen Figueroa, 2025. "Posted Wage Cyclicality: Evidence from High-Quality Vacancy Data," Bristol Economics Discussion Papers 25/812, School of Economics, University of Bristol, UK.
    5. Choi, Sekyu & Figueroa, Nincen & Villena-Roldán, Benjamin, 2020. "Wage Cyclicality Revisited: The Role of Hiring Standards," MPRA Paper 98240, University Library of Munich, Germany.
    6. Todd Potts & Jennifer Roy, 2025. "The heterogeneous impact of uncertainty shocks on labour market outcomes for men and women," Applied Economics, Taylor & Francis Journals, vol. 57(50), pages 8327-8345, October.
    7. Merkl, Christian & Stüber, Heiko, 2024. "Wage and employment cyclicalities at the establishment level," European Economic Review, Elsevier, vol. 161(C).
    8. Tomas Key & Jamie Lenney, 2024. "The impact of aggregate fluctuations across the UK income distribution," Bank of England working papers 1083, Bank of England.
    9. Carreño, José Gabo & Uras, Burak, 2024. "Macro welfare effects of flexible labor contracts," European Economic Review, Elsevier, vol. 161(C).
    10. Daniel Schäfer & Carl Singleton, 2020. "Nominal Wage Adjustments and the Composition of Pay: New Evidence from Payroll Data," Economics working papers 2020-11, Department of Economics, Johannes Kepler University Linz, Austria.
    11. Jonathon Hazell & Bledi Taska, 2020. "Downward Rigidity in the Wage for New Hires," Discussion Papers 2028, Centre for Macroeconomics (CFM).
    12. Carreño Bustos, José Gabo, 2023. "Flexible Contracts as Business Cycle Stabilizers," Discussion Paper 2023-007, Tilburg University, Center for Economic Research.
    13. 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.

    More about this item

    Keywords

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    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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