What Can We Learn from Idiosyncratic Wage Changes?

Cynthia L. Doniger, Board of Governors of the Federal Reserve System
2021 Finance and Economics Discussion Series  
I document six facts about wage changes. First, most pay revisions occur at yearly frequency, but a small proportion occur at idiosyncratic times. Second, idiosyncratic pay changes are larger and more dispersed than year-end pay changes and resemble more pay changes occurring at job-to-job transitions. Third, idiosyncratic pay changes are more common for workers with less experience and, fourth, in firms higher on the job-ladder. Fifth, industries in which the incidence of idiosyncratic raises
more » ... ave risen have experienced greater declines in labor share. Sixth, industries in which more firms report willingness to negotiate wages have greater concentrations of idiosyncratic revisions. An on-the-job search model with heterogeneous wage contracts can rationalize these facts.
doi:10.17016/feds.2021.055 fatcat:pl7ehnk3svevzcjzxp3xt3dfhy