On the Cyclicality of Real Wages and Employment: New Evidence and Stylized Facts from Performance Pay and Fixed Wage Jobs

74 Pages Posted: 14 Aug 2017 Last revised: 24 Mar 2020

See all articles by Christos Makridis

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Maury Gittleman

Bureau of Labor Statistics

Date Written: March 26, 2019

Abstract

Using the National Compensation Survey between 2004-2017, we document substantial cyclical heterogeneity among performance pay and fixed wage jobs. Using within-establishment variation among jobs that are classified on the basis of duties and responsibilities, we find that performance pay jobs respond primarily by adjusting the intensive margin of compensation per worker over the business cycle, whereas fixed wage jobs respond by adjusting the extensive margin of employment. These results are driven by the fact that firms can more easily adjust the strength of incentives in performance pay jobs over the business cycle.

Keywords: business cycle, compensation, employment, incentives, pay for performance

JEL Classification: J21, J22, J31

Suggested Citation

Makridis, Christos and Gittleman, Maury, On the Cyclicality of Real Wages and Employment: New Evidence and Stylized Facts from Performance Pay and Fixed Wage Jobs (March 26, 2019). Available at SSRN: https://ssrn.com/abstract=3017034 or http://dx.doi.org/10.2139/ssrn.3017034

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Maury Gittleman

Bureau of Labor Statistics ( email )

2 Massachusetts Avenue, NE
Room 4130
Washington, DC 20212
United States

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