Do firms’ wage-setting powers increase during recessions?

Sørensen, Todd A.

doi:10.15185/izawol.355

Cited by 1 publication

(1 citation statement)

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“…Because many of these discontinuities were subtle, their repercussions may not become readily visible for years, but in the aggregate, they suggest that the recession marked the beginning of a “new normal” for young adults entering the market. For example, the diminishing wage return on years of experience for C2 and C3 workers (Tables 5 – 6 ), and on job prestige for C2 and C3 females ( Table 6 ), may be indicative of employers broadly exploiting recessionary conditions to permanently increase their wage setting ability [ 99 ]. If validated, this could have implications for workers’ long-term earning power and household wealth.…”

Section: Discussionmentioning

confidence: 99%

Early-career trajectories of young workers in the U.S. in the context of the 2008–09 recession: The effect of labor market entry timing

Atherwood

Sparks

2019

PLoS ONE

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ObjectiveThe goal of this study was to analyze differences in the employment and wage trajectories of college-educated young workers in the United States, as distinguished by the timing of their entry into the labor market relative to the onset of the 2008–09 recession.Methods and findingsUsing annual American Community Survey microdata, we analyzed the first six years of employment and wage outcomes for cohorts of young workers on traditional-student pathways entering the market (1) in 2006, shortly before recession onset; (2) in 2009, during the recession; and (3) in 2012, three years after the recession officially ended. We found evidence for negative effects on outcomes and outcome trajectories differentiated by the recession’s proximity to workers’ labor market entry, including lower wages for the cohort entering in 2009. However, recession effects tended to be smaller for workers at the high end of the education gradient or with no direct exposure to the recession and were outweighed by gendered labor outcome disparities. We also observed a possibly enduring, recession-induced rise in the number of idle young males and the proportion of male and female high school graduates enrolled in college and not working.ConclusionsCohort differences in labor outcomes show that the disadvantages of entering the labor market during an economic downturn appear lasting. However, the subordinate role of timing effects in sorting young workers’ employment and wage rates, when compared to the stark stratification of employment and wage outcomes by education or sex, is a useful reminder that these latter social structures remain key determinants of labor outcomes.

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Section: Discussionmentioning

confidence: 99%