The intensive and extensive margins of real wage adjustment

Mary Daly and Bart Hobijn

No 2016-4, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Using 35 years of data from the Current Population Survey we decompose fluctuations in real median weekly earnings growth into the part driven by movements in the intensive margin-wage growth of individuals continuously full-time employed-and movements in the extensive margin-wage differences of those moving into and out of full-time employment. The relative importance of these two margins varies significantly over the business cycle. When labor markets are tight, continuously full-time employed workers drive wage growth. During labor market downturns, the procyclicality of the intensive margin is largely offset by net exits out of full-time employment among workers with lower earnings. This leads aggregate real wages to be largely acyclical. Most of the extensive margin effect works through the part-time employment margin. Notably, the unemployment margin accounts for little of the variation or cyclicality of median weekly earnings growth.

JEL-codes: E24 J30 J60 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2016-03-31
New Economics Papers: this item is included in nep-lab
Note: This paper is largely based on Daly et al. (2011).
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Citations: View citations in EconPapers (8)

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DOI: 10.24148/wp2016-04

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