Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data / John Grigsby, Erik Hurst, Ahu Yildirmaz.

Format:

Book

Author/Creator:

Grigsby, John.

Contributor:

National Bureau of Economic Research.

Hurst, Erik.

Yildirmaz, Ahu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25628.

NBER working paper series no. w25628

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Aggregate Nominal Wage Adjustments

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. The data allow us to define a worker's per-period base contract wage separately from other forms of compensation such as bonuses. We provide evidence that the extent to which base wages adjust is likely the appropriate concept of wage stickiness in many macro models. Nominal base wage declines are much rarer than previously thought with only 2% of job-stayers receiving a nominal base wage cut during a given year. However, accounting for shifts in nominal base wages of job-changers implies that aggregate nominal wages are more flexible than the nominal wages of job-stayers. In addition, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Finally, nominal base wage adjustments are state-dependent: downward aggregate nominal wage adjustments were much more common during the Great Recession than in the subsequent recovery period. Throughout, we highlight differences in the adjustment patterns of base wages and of broader wage measures that include bonuses. Collectively, our results can be used to discipline models of nominal wage rigidity.

Notes:

Print version record

March 2019.