Historical Real Wage
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- Michael Elsby, Donggyun Shin, and Gary Solon. (2013). “Wage Adjustment in the Great Recession.” In: ...
- ABSTRACT: As of a quarter-century ago, the conventional wisdom among macroeconomists was that real wage rates were more or less non-cyclical, and many macroeconomic models described wage inflexibility as a key contributor to cyclical unemployment. Since then, however, numerous empirical studies based on microdata for workers have found that real wages are substantially pro-cyclical. This pro-cyclicality had been obscured in aggregate wage statistics, which tend to give more weight to low-skill workers during expansions than during recessions. Most of the U.S. microdata-based literature is based on data extending no later than the early 1990s, so an obvious question is what the cyclical wage patterns have been more recently. Most importantly, how have wages behaved during the Great Recession? Is there reason to think that wages responded especially sluggishly during this downturn and that stickiness of wages contributed to the Great Recession's unusually high unemployment? Elsby, Shin, and Solon address these questions with data for both the United States and Great Britain.