How Prevalent is Downward Rigidity in Nominal Wages? Evidence from Payroll Records in Washington State

26 Pages Posted: 21 May 2019

See all articles by Ekaterina jardim

Ekaterina jardim

Amazon.com

Gary Solon

University of Arizona; National Bureau of Economic Research (NBER)

Jacob Vigdor

University of Washington

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Abstract

For more than 80 years, many macroeconomic analyses have been premised on the assumption that workers' nominal wage rates cannot be cut. The U.S. evidence on this assumption has been inconclusive because of distortions from reporting error in household surveys. Following a British literature, we reconsider the issue with more accurate wage data from the payroll records of most employers in the State of Washington over the period 2005-2015. For every one of the 40 four-quarters-apart periods for which we observe year-to-year wage changes, we find that at least 20 percent of job stayers experience nominal wage reductions.

Keywords: nominal wage rigidity, payroll records

JEL Classification: J3, E24

Suggested Citation

jardim, Ekaterina and Solon, Gary and Vigdor, Jacob, How Prevalent is Downward Rigidity in Nominal Wages? Evidence from Payroll Records in Washington State. IZA Discussion Paper No. 12124. Available at SSRN: https://ssrn.com/abstract=3390111

Ekaterina Jardim

Amazon.com ( email )

Seattle, WA 98144
United States

Gary Solon (Contact Author)

University of Arizona ( email )

Department of Economics
Eller College of Management
Tucson, AZ 85719
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jacob Vigdor

University of Washington ( email )

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