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Kaufmann, Daniel
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Do Sticky Wages Matter? New Evidence from Matched Firm Survey and Register Data
2022, Anne Kathrin Funk, Kaufmann, Daniel
We study the causal effects of downward nominal wage rigidity after a deflationary monetary policy shock using Swiss data on employee‐level contractual wages matched with income and employment from social security register data. We exploit the discontinuity around the origin of the wage growth distribution to compare the outcomes of individuals with wage freezes (treatment group) and small wage cuts (control group) before and after an unexpected decision by the Swiss National Bank leading to a 1% decline of the price level. Locally (that is, near the origin of the wage growth distribution), downward nominal wage rigidities cause a 4.4% decline in income and a 0.7 percentage point increase in the probability of unemployment. In the aggregate, income declines by 0.3% and the probability of unemployment increases by 0.05 percentage points.
Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?
2022, Anne Kathrin Funk, Kaufmann, Daniel
We measure the labor market outcomes of employees with downward rigid base wages after an unexpected deflationary shock in Switzerland using a firm survey matched with Social Security register data. The employees that additionally receive downward flexible compensation, such as bonuses, are less likely to lose their job after a deflationary shock than those only receiving a base wage. Only a modest share of employees receives downward flexible compensation, however. Therefore, these compensation schemes do not offset the overall allocative effects of downward rigid base wages.