Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data

John Grigsby, Erik Hurst and Ahu Yildirmaz

No 25628, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. The data allow us to define a worker's per-period base contract wage separately from other forms of compensation such as bonuses. We provide evidence that the extent to which base wages adjust is likely the appropriate concept of wage stickiness in many macro models. Nominal base wage declines are much rarer than previously thought with only 2% of job-stayers receiving a nominal base wage cut during a given year. However, accounting for shifts in nominal base wages of job-changers implies that aggregate nominal wages are more flexible than the nominal wages of job-stayers. In addition, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Finally, nominal base wage adjustments are state-dependent: downward aggregate nominal wage adjustments were much more common during the Great Recession than in the subsequent recovery period. Throughout, we highlight differences in the adjustment patterns of base wages and of broader wage measures that include bonuses. Collectively, our results can be used to discipline models of nominal wage rigidity.

JEL-codes: E24 J3 J31 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-lma and nep-mac
Note: EFG LS ME
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Citations: View citations in EconPapers (31)

Published as John Grigsby & Erik Hurst & Ahu Yildirmaz, 2021. "Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data," American Economic Review, American Economic Association, vol. 111(2), pages 428-471, February.

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Journal Article: Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data (2021)
Working Paper: Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data (2019)
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