Nominal Wage Rigidity in Australia

Jacqueline Dwyer ()
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Jacqueline Dwyer: Reserve Bank of Australia

Australian Journal of Labour Economics (AJLE), 2003, vol. 6, issue 1, 5-24

Abstract: The existence of downward nominal wage rigidity has been used to argue against the adoption of zero inflation targets. Investigations of nominal wage flexibility in Australia have been hindered by a lack of suitable data. Using a unique and unpublished microdata set, we find strong evidence of downward nominal wage rigidity. The idea that firms are able to circumvent wage rigidity by varying broader forms of remuneration is not supported by our study. We find that these broad measures are still skewed away from pay cuts, though to a lesser extent than wages. The extent of rigidity we do observe lends support to the pursuit of small positive rates of inflation as an objective of monetary policy.

Keywords: Macroeconomics; employment; unemployment; wages; wage indexation; Wages, compensation, and labor costs: general (search for similar items in EconPapers)
JEL-codes: E24 J30 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (21)

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Working Paper: Nominal Wage Rigidity in Australia (2000)
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