 How do European firms adjust their labour costs when nominal wages are rigid?Jan Babecký, Philip Du Caju, Theodora Kosma, Martina Lawless, Julian Messina and Tairi Room Labour Economics, 2012, vol. 19, issue 5, 792-801 Abstract: Although workers' nominal wages are seldom cut, firms have multiple options available if they require adjustments in their wage bills. We broaden the analysis of relative (in)flexibility in labour costs by investigating the use of other margins of labour cost adjustment at the firm level beyond base wages. Using data from a unique survey, we find that European firms make extensive use of other components of compensation to adjust the cost of labour. Interestingly, firms facing base wage rigidity are more likely to use alternative margins of labour cost adjustment; therefore there appears to be some degree of substitutability between wage flexibility and the flexibility of other cost components. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by unionisation and firm and worker characteristics. Keywords: Labour costs; Wage rigidity; Firm survey; European Union (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:19:y:2012:i:5:p:792-801 DOI: 10.1016/j.labeco.2012.03.010 Access Statistics for this article Labour Economics is currently edited by A. Ichino More articles in Labour Economics from Elsevier |
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