How Cyclical Is the User Cost of Labor?

Marianna Kudlyak

No 2024-10, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: In employment relationships, a wage is an installment payment on an implicit long-term agreement between a worker and a firm. The price of labor that impacts firm’s hiring decisions, instead, reflects the hiring wage as well as the impact of economic conditions at the time of hiring on future wages. Measured by the labor’s user cost, the price of labor is substantially more pro-cyclical than the new-hire wage or the average wage. The strong procyclicality of the price of labor calls for other forces for cyclical labor demand to explain employment fluctuations.

Keywords: User Cost of Labor; wages; cyclicality; wage rigidity; unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 J30 J41 J63 J64 (search for similar items in EconPapers)
Pages: 25
Date: 2024-03-31
New Economics Papers: this item is included in nep-lab
Note: Acknowledgements: The paper is prepared for publication at the Journal of Economic Perspectives.
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Related works:
Journal Article: How Cyclical Is the User Cost of Labor? (2024)
Working Paper: How Cyclical Is the User Cost of Labor? (2024)
Working Paper: How Cyclical Is the User Cost of Labor? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:98027

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DOI: 10.24148/wp2024-06

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