The Relation Between Skill Levels and the Cyclical Variability of Employment, Hours, and Wages
IMF Working Papers, May 1, 1993
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Bibliographic details
- Authors: Michael P. Keane, Eswar S Prasad
- Published: May 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451974621.001
Overview
- Title: The Relation Between Skill Levels and the Cyclical Variability of Employment, Hours, and Wages
- Authors: Michael P. Keane, Eswar S Prasad
- Date: May 1, 1993
- Publication type: IMF Working Papers, Working Paper No. 1993/044
- Pages: 38
Research question and approach
- Uses micro panel data to examine differences in the cyclical variability of employment, hours, and real wages for skilled and unskilled workers.
- Uses a college degree as a proxy for skills in some analyses.
- Interprets cross-industry patterns as indicative of inter-industry differences in labor contracting.
Key findings
- At the aggregate level, skilled and unskilled workers are subject to essentially the same degree of cyclical variation in wages.
- Important differences emerge between skilled and unskilled workers in:
- Patterns of employment variation.
- Patterns of hours variation.
- These differences are especially pronounced when a college degree is used as the proxy for skills.
- The quality of labor input per manhour tends to rise in recessions, inducing a countercyclical bias in aggregate measures of the real wage.
- There are substantial differences across industries in the cyclical variation of:
- Employment
- Hours
- Wage differentials
- Cross-industry differences are interpreted as evidence of important inter-industry differences in labor contracting.
Interpretation and implications
- The countercyclical rise in labor-input quality per manhour implies aggregate real-wage measures may understate true cyclical wage pressures.
- Similar cyclical wage variation across skill groups challenges the conventional view that wage cyclicality differs substantially by skill level.
- Industry-specific labor-contracting practices appear to shape heterogeneous cyclical responses of employment, hours, and wages.
Subject classifications and keywords
- Subjects: Employment, Human capital, Labor, Real wages, Wages
- Keywords: ability worker, business cycle, Employment, employment variability, Human capital, implicit contract, industry level, labor market, quality worker, Real wages, skill premium, unemployment rate, unskilled worker, Wages, worker heterogeneity, worker productivity, WP