Cyclical Labor Costs within Jobs

62 Pages Posted: 10 Nov 2018 Last revised: 10 Oct 2019

See all articles by Daniel Schaefer

Daniel Schaefer

University of Edinburgh

Carl Singleton

Department of Economics, University of Reading

Date Written: October 18, 2018

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 2.8 percent for new hires and 2.6 percent 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.

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

JEL Classification: E24, E32, J30

Suggested Citation

Schaefer, Daniel and Singleton, Carl, Cyclical Labor Costs within Jobs (October 18, 2018). European Economic Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3269258 or http://dx.doi.org/10.2139/ssrn.3269258

Daniel Schaefer

University of Edinburgh ( email )

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

Carl Singleton (Contact Author)

Department of Economics, University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

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