Sticky wages

Date posted: December 10, 2010

Changes to workers’ salaries, or wages, are important. Workers count on increases in their pay over time to make progress in their standard of living. Of course, those same workers don’t look forward to a possible decrease in pay during recessions. N.C. State University economist Mike Walden explains just how frequently workers’ wages and salaries move up or down.

“Before I read the study that I am going to report on, I thought that the answer would be very frequently — perhaps for most people at least once a year. But based on a new study based on a national sample, over any three-month period only about 20 percent of the workers that are paid by the hour and only 5 percent of those workers who are paid a salary can expect to see a change in their rate of pay.  And those numbers are constant over season. That is, we might think at the end of the year, beginning of the year, you would see they go up. They don’t go up. They are constant over season. They are constant between occupations. They are constant between industries. The finding here is that people don’t see their rate of pay change very frequently.

“Now the one thing the study did find is that big economic changes or factors — macroeconomic factors, as we economists call them — can affect how rapidly people do see their pay change. Both a rise in the inflation rate and a rise in the unemployment rate increases the likelihood of any worker seeing their rate of pay change.”

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