The Quality-Adjusted Cyclical Price of Labor

Arbeitspapier

Typical measures of wages, such as average hourly earnings, fail to capture cyclicality in the effective cost of labor in the presence of (i) cyclical fluctuations in the quality of worker-firm matches, or (ii) wages being smoothed within employment matches. To address both concerns, we estimate cyclicality in labor's user cost exploiting the long-run wage in a match to control for match quality. Using NLSY data for 1980 to 2019, we identify three channels by which hiring in a recession affects user cost: It lowers the new-hire wage; it lowers wages going forward in the match; but it also results in higher subsequent separations. All totaled, we find that labor's user cost is highly procyclical, increasing by more than 4% for a 1 pp decline in the unemployment rate. For large recessions, like the Great Recession, that implies a decline in the price of labor of about 15%.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 16024

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles ; Wages, Compensation, and Labor Costs: General ; Labor Contracts ; Labor Turnover; Vacancies; Layoffs ; Unemployment: Models, Duration, Incidence, and Job Search
• Thema: wages ; cyclicality ; wage rigidity

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bils, Mark ; Kudlyak, Marianna ; Lins, Paulo
• Ereignis: Veröffentlichung
• (wer): Institute of Labor Economics (IZA)
• (wo): Bonn
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/272651
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ