National Wage Setting

Jonathon Hazell (), Christina Patterson (), Heather Sarsons and Bledi Taska
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Jonathon Hazell: London School of Economics (LSE)
Christina Patterson: University of Chicago Booth School of Business
Bledi Taska: Burning Glass Technologies

No 2203, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: How do firms set wages across space? Using vacancy data with detailed job-level information supplemented with a survey of HR managers and self-reported data on workers’ wages, we show that, within the firm, 30-40% of posted wages for a given job are identical across space. Compared to differences between firms, nominal posted wages within the firm vary relatively little with local prices, a pattern that is present for realized wages as well. Using the pass-through of local shocks to wages in other locations of the firm, we argue that the limited variation of wages within firms is due to national wage setting, meaning that firms choose rigid pay structures in which they set very similar nominal wages for the same job in different regions. Our survey suggests that one reason firms set wages nationally is that nominal, rather than real, wage comparisons matter to workers.

JEL-codes: H56 J24 J33 J45 (search for similar items in EconPapers)
Pages: 98 pages
Date: 2021-11
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2203

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