Downward Rigidity in the Wage for New Hires

Jonathon Hazell and Bledi Taska

American Economic Review, 2025, vol. 115, issue 12, 4183-4217

Abstract: Wage rigidity is an important explanation for unemployment fluctuations. In benchmark models wages for new hires are key, but there is limited evidence on this margin. We use wages posted on vacancies, with job and establishment information, to measure the wage for new hires. We show that our measure of the wage for new hires is rigid downward and flexible upward, in two steps. First, wages change infrequently at the job level, and fall especially rarely. Second, wages do not respond to rises in unemployment, but respond strongly to falls in unemployment. Job information is crucial for detecting downward rigidity.

JEL-codes: E24 E32 J23 J31 J63 M51 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/aer.20201793

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