Downward rigidity in the wage for new hires

Hazell, Joe ORCID: 0009-0002-4930-7946 and Taska, Bledi (2025) Downward rigidity in the wage for new hires. American Economic Review, 115 (12). 4183 - 4217. ISSN 0002-8282

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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.

Item Type:	Article
Additional Information:	© 2025 American Economic Association
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation) E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J63 - Turnover; Vacancies; Layoffs M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M51 - Firm Employment Decisions; Promotions (hiring, firing, turnover, part-time, temporary workers, seniority issues)
Date Deposited:	02 Sep 2024 16:15
Last Modified:	11 Dec 2025 01:48
URI:	http://eprints.lse.ac.uk/id/eprint/125326

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