Downward rigidity in the wage for new hires

Joe Hazell and Bledi Taska

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: wage regidity; unemployment; business cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J23 J31 J63 M51 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-12-01
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Published in American Economic Review, 1, December, 2025, 115(12), pp. 4183 - 4217. ISSN: 0002-8282

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