Downward wage rigidity and job mobility

  • Cornelißen T
  • Hübler O
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Abstract

Using data from the German Socio-Economic Panel (GSOEP) we study whether being individually affected by downward wage rigidity has an effect on layoffs, quits and intra-firm mobility. Within a structural empirical model we estimate the individual extent of wage rigidity. This is expressed by the wage sweep-up, which measures by how much individual wage growth increases through the effect of downward wage rigidity when compared to a counterfactual tabour market with flexible wage setting. We find robust negative effects of wage sweep-up on quits and layoffs and some evidence for a positive association of wage sweep-up and promotion opportunities. This is consistent with a core-periphery view of the tabour force, where a core work force is protected from layoffs and wage cuts and at the same time enjoys good promotion opportunities. On the other side a peripheral work force provides a buffer for adjustment and suffers from both flexible wages, more insecure jobs and less internal promotion opportunities.

Author-supplied keywords

  • Layoffs
  • Promotions
  • Quits
  • Wage rigidity
  • Wage sweep-up

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Authors

  • Thomas Cornelißen

  • Olaf Hübler

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