Wage Rigidity and Job Creation
Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level data from the CPS to measure the sensitivity of wages of newly hired workers to changes in aggregate labor market conditions. The wage of new hires, unlike the aggregate wage, is volatile and responds almost one-to-one to changes in labor productivity. We conclude that there is little evidence for wage stickiness in the data. We also show, however, that a little wage rigidity goes a long way in amplifying the response of job creation to productivity shocks.
Published in the Journal of Monetary Economics, 60(80)
Appendix with supplemental materials
The dataset includes the following time series for wages in the US, 1979-2006 (quarterly):
In addition, composition bias corrected versions of these wage series are included, as well as the sample averages and regression coefficients from the earnings equation of the worker characteristics that were used to correct for composition bias:
Also included in the dataset are the standard errors for all wage series and various aggregate variables.
All series from the CPS are hours-weighted means/medians and are seasonally adjusted. Wages are for non-supervisory wage and salary workers from the private non-farm sector. These data were constructed from the CPS outgoing rotation groups and basic monthly data files. See the paper for a full description of the data.
Note: If you use the aggregate data to calculate business cycle statistics or at the right-hand side of a regression, you may want to correct your estimates for sampling error, see the appendix with supplemental materials for details.
Subgroups of workers:
Measure of centrality:
Composition bias corrected series:
If you have any questions about these data or are interested in series that are not in the downloadable file, please email me.