Non-base wage components as a source of wage adaptability to shocks. Evidence from European firms, 2010–2013

Jan Babecký, Clémence Berson, Ludmila Fadejeva, Ana Lamo, Petra Marotzke, Fernando Martins and Paweł Strzelecki

No 298, NBP Working Papers from Narodowy Bank Polski

Abstract: This paper provides evidence on the role of non-base wage components as a channel for firms to adjust labour costs in the event of adverse shocks. It uses data from a firm-level survey for 25 European countries that covers the period 2010–2013. We find that firms subject to nominal wage rigidities, which prevent them from adjusting base wages, are more likely to cut non-base wage components in order to adjust labour costs when needed. Firms thus use non-base wage components as a buffer to overcome base wage rigidity. We further show that while non-base wage components exhibit some degree of downward rigidity, they do so to a lesser extent than base wages.

Keywords: downward nominal wage rigidity; bonuses; firm survey; European Union (search for similar items in EconPapers)
JEL-codes: C81 J30 J32 P5 (search for similar items in EconPapers)
Pages: 40
Date: 2018
Note: The work was conducted within the framework of the Wage Dynamics Network coordinated by the European Central Bank. We thank Michal Franta, Eva Hromádková, Juan Francisco Jimeno, Theodora Kosma, Pedro Martins, Daniel Münich, an anonymous referee of the ECB WP series and the participants of the WDN meetings and a seminar at the Czech National Bank for helpful comments.
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Related works:
Journal Article: Non-base wage components as a source of wage adaptability to shocks: evidence from European firms, 2010–2013 (2019)
Working Paper: Non-base wage components as a source of wage adaptability to shocks: Evidence from European firms, 2010 2013 (2018)
Working Paper: Non-base Wage Components as a Source of Wage Adaptability to Shocks: Evidence from European Firms, 2010-2013 (2018)
Working Paper: Non-base wage components as a source of wage adaptability to shocks: evidence from European firms, 2010–2013 (2018)
Working Paper: Non-base wage components as a source of wage adaptability to shocks: Evidence from European firms, 2010-2013 (2018)
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