American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Downward Rigidity in the Wage for New Hires
American Economic Review
(pp. 4183–4217)
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.Citation
Hazell, Jonathon, and Bledi Taska. 2025. "Downward Rigidity in the Wage for New Hires." American Economic Review 115 (12): 4183–4217. DOI: 10.1257/aer.20201793Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- J23 Labor Demand
- J31 Wage Level and Structure; Wage Differentials
- J63 Labor Turnover; Vacancies; Layoffs
- M51 Personnel Economics: Firm Employment Decisions; Promotions