Aggregate Real Wages: Macro Fluctuations and Micro Drivers

Mary C. Daly, Bart Hobijn and Theodore S. Wiles
Additional contact information
Mary C. Daly: Federal Reserve Bank of San Francisco
Theodore S. Wiles: The Analysis Group

No 11-158/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Using data from the Current Population Survey from 1980 through 2010 we examine what drives variation andcyclicality in the growth rate of real wages over time. We employ a novel decomposition technique that allowsus to divide the time series for median weekly earnings growth into the part associated with the wage growth ofpersons employed at the beginning and end of the period (the wage growth effect) and the part associated withchanges in the composition of earners (the composition effect). The relative importance of these two effectsvaries widely over the business cycle. When the labor market is tight job switchers get high wage increases,making them account for half of the variation in median weekly earnings growth over our sample. Their wagegrowth, as well as that of job-stayers, is procyclical. During labor market downturns, this procyclicality islargely offset by the change in the composition of the workforce, leading aggregate real wages to be almost noncyclical.Most of this composition effect works through the part-time employment margin. Remarkably, theunemployment margin neither accounts for much of the variation nor for much of the cyclicality of medianweekly earnings growth.

Keywords: Business cycle; labor market dynamics; wages. (search for similar items in EconPapers)
JEL-codes: E24 J3 J6 (search for similar items in EconPapers)
Date: 2011-11-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://papers.tinbergen.nl/11158.pdf (application/pdf)

Related works:
Working Paper: Aggregate real wages: macro fluctuations and micro drivers (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110158

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().