Real Wages and Hours in the Great Recession: Evidence from Firms and Their Entry-Level Jobs

62 Pages Posted: 27 Jan 2018

See all articles by Daniel Schaefer

Daniel Schaefer

University of Edinburgh

Carl Singleton

Department of Economics, University of Reading

Multiple version iconThere are 2 versions of this paper

Date Written: December 05, 2017

Abstract

Using employer-employee panel data, we provide novel facts on how real wages and working hours within jobs responded to the UK’s Great Recession. In contrast to previous studies, our data enables us to address the cyclical composition of jobs. We show that firms were able to respond 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 2.8 per cent for new hires and 2.6 per cent for job stayers. Hours of new hires in entry-level jobs were also substantially procyclical, while job-stayer hours were nearly constant. Our findings suggest that models assuming rigid labour costs of new hires are not helpful for understanding the behaviour of unemployment over the business cycle.

Keywords: Wage Rigidity, Great Recession, Hours Worked, Job-Level Analysis

JEL Classification: E240, E320, J310

Suggested Citation

Schaefer, Daniel and Singleton, Carl, Real Wages and Hours in the Great Recession: Evidence from Firms and Their Entry-Level Jobs (December 05, 2017). CESifo Working Paper Series No. 6766. Available at SSRN: https://ssrn.com/abstract=3109310

Daniel Schaefer (Contact Author)

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

Carl Singleton

Department of Economics, University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

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