Rigidity in real hiring wages plays a crucial role in some recent macroeconomic models. But are hiring wages really so noncyclical? We propose using employer/employee longitudinal data to track the cyclical variation in the wages paid to workers newly hired into specific entry jobs. Illustrating the methodology with 1982-2008 data
from the Portuguese census of employers, we find real entry wages
were about 1.8 percent higher when the unemployment rate was 1 percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment. (JEL E24, E32, J31, J64)
Martins, Pedro S., Gary Solon, and Jonathan P. Thomas.
"Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach."
American Economic Journal: Macroeconomics,
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
Business Fluctuations; Cycles
Wage Level and Structure; Wage Differentials
Unemployment: Models, Duration, Incidence, and Job Search