Nominal Wage Adjustments and the Composition of Pay: New Evidence from Payroll Data

57 Pages Posted: 21 Jul 2020

See all articles by Daniel Schaefer

Daniel Schaefer

Johannes Kepler University Linz

Carl Singleton

Department of Economics, University of Reading

Date Written: June 27, 2020

Abstract

We use representative payroll data from Great Britain to document novel facts about nominal wage adjustments, focusing on workers who stayed in the same firm and job from one year to the next. The richness of these data allows us to analyse basic pay and the other components of earnings, such as overtime and incentive pay, while accounting for hours worked. Weekly and hourly basic pay show signs of downward nominal rigidity, but non-basic pay components adjust more commonly. Unusually, these payroll-based data also report the wage rates of hourly-paid employees. A quarter of these workers typically see no change in their wage rates from one year to the next in the same job, and very few experience wage cuts. We exploit the employer-employee link in the data and find evidence of state-dependent pay setting, depending on the business cycle and whether firms are shrinking or expanding. Finally, we show that the basic and non-basic wages of new hires and existing employees are similarly flexible.

Keywords: downward nominal wage rigidity, components of pay, hourly pay rates, hiring wages, allocative wages

JEL Classification: E24, E32, J31, J33

Suggested Citation

Schaefer, Daniel and Singleton, Carl, Nominal Wage Adjustments and the Composition of Pay: New Evidence from Payroll Data (June 27, 2020). Available at SSRN: https://ssrn.com/abstract=3636754 or http://dx.doi.org/10.2139/ssrn.3636754

Daniel Schaefer (Contact Author)

Johannes Kepler University Linz ( email )

Department of Economics
Altenberger Strasse 69
Linz, Upper Austria 4040
Austria
+4373224687351 (Phone)

HOME PAGE: http://https://sites.google.com/view/danielschaeferecon

Carl Singleton

Department of Economics, University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
5
Abstract Views
165
PlumX Metrics