òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Sticky Wages on the Layoff Margin
òòò½Íø Review
vol. 115,
no. 2, February 2025
(pp. 491–524)
Abstract
We design and field an innovative survey of unemployment insurance (UI) recipients that yields new insights about wage stickiness on the layoff margin. A majority of UI recipients would accept pay cuts of 5–10 percent to save their jobs, and one-third would accept a 25 percent cut. Yet worker-employer discussions about cuts in pay, benefits, or hours in lieu of layoffs are exceedingly rare. Roughly one-quarter of the layoffs in our sample violate the theoretical condition for bilaterally efficient separations. We draw on our findings and other evidence to assess theories of wage stickiness and its role in layoffs.Citation
Davis, Steven J., and Pawel M. Krolikowski. 2025. "Sticky Wages on the Layoff Margin." òòò½Íø Review 115 (2): 491–524. DOI: 10.1257/aer.20240309Additional Materials
JEL Classification
- C83 Survey Methods; Sampling Methods
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J63 Labor Turnover; Vacancies; Layoffs
- J65 Unemployment Insurance; Severance Pay; Plant Closings