IMF Working Papers

Divergence in Post-Pandemic Earnings Growth: Evidence from Micro Data

By Sophia Chen, Do Lee

October 11, 2024

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Format: Chicago

Sophia Chen, and Do Lee. "Divergence in Post-Pandemic Earnings Growth: Evidence from Micro Data", IMF Working Papers 2024, 222 (2024), accessed December 22, 2024, https://doi.org/10.5089/9798400291814.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We use a comprehensive employer-employee dataset to examine post-pandemic worker earnings in the US. Our findings reveal that earnings grew faster in counties that were less severely impacted at the onset of the pandemic. This divergence in growth was both substantial and persistent, particularly for lower-paid and nonmanagerial workers, as well as for those in smaller firms. Both wage increases and additional hours contributed to this earnings growth. This evidence aligns with a job-ladder framework, where labor market competition leads to a dispersion of earnings across counties but compresses earnings among workers in counties with strong labor markets. Our findings provide a microfoundation for the wage Phillips curve and have direct implications for stabilization policies.

Keywords: Earnings, Labor Market Conditions, Pandemic, Wage

Publication Details