New Evidence on Cyclical Variation in Labor Costs in the U.S

52 Pages Posted: 6 Feb 2018

See all articles by Weishi Gu

Weishi Gu

University of California, Santa Cruz - Department of Economics

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Abstract

Employer-provided nonwage benefit expenditures now account for one-third of U.S. firms' labor costs. We show that a broad measure of real labor costs including such benefit expenditures has become countercyclical during 1982-2014, contrary to the conventional view that labor costs are procyclical. Using BLS establishment-job data, we find that even real wages, the main focus of prior literature, have become countercyclical. Benefit expenditures are less rigid than nominal wages, although both components of labor costs have become more rigid. These rigidities, along with the rising relative importance of aggregate demand shocks (including the financial crisis), help explain countercyclical labor costs.

Keywords: wages, benefits, compensation, economic fluctuations, cyclicality

JEL Classification: E24, J32, E32

Suggested Citation

Gu, Weishi and Prasad, Eswar S., New Evidence on Cyclical Variation in Labor Costs in the U.S. IZA Discussion Paper No. 11311. Available at SSRN: https://ssrn.com/abstract=3117315

Weishi Gu (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Santa Cruz, CA 95064
United States
+1 (831) 459-4791 (Phone)

HOME PAGE: http://https://sites.google.com/site/graceweishigu/home

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

440 Warren Hall
Ithaca, NY 14853
United States

HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
4
Abstract Views
58
PlumX Metrics