Firms will hire all the workers it makes sense to hire at prevailing wages, the thinking goes, so any minimum wage that forces firms to pay existing workers more will make those jobs uneconomical, leading to sackings.
As a result, employers faced pressure to raise employee productivity at times of weak demand, in order to reduce the effective real wage of existing workers.
Theoretically, firms could hire more people by paying lower wages to existing workers, and if wages are not decreased during a recession it may prevent new workers from being hired.
Employers can set the hiring conditions and wages of new workers with more freedom than they can change the wages of existing workers, the researchers argued, making the wages of recent college graduates a better indicator of the true price of labor and the underlying strength of the labor market.
His union recently accepted a new contract that freezes wages for existing workers for most of its seven years, lowers pay for new hires, dilutes benefits and brings temporary workers to the assembly line at even lower pay and no benefits whenever there is a rise in demand for Harley's roaring bikes.
A renewed critique of productivity pessimism", Bill Martin and Robert Rowthorn, Centre for Business Research, May 2012".How sticky wages in existing jobs can affect hiring", Mark Bils, Yongsung Chang, Sun-Bin Kim, NBER Working Paper 19821, January 2014.
If wages of matched workers are stuck too high in a recession, then firms will require more effort, lowering the value of additional labor and reducing new hiring.If wages for existing workers are sticky then firms will respond to plunging demand by firing lots of workers.
Tepid job growth, stagnant wages for existing employees and growing international demand for American products have all helped corporate profit margins reach all-time highs, according to two different measures from the Department of Commerce and from earnings per share in the S.&P.
Myths and reality What now? Bugging the UN Doesn't add up Baby and bathwater Paper dreams The love that dare not speak its name Reprints Related items Multiculturalism: The kindness of strangers?Feb 26th 2004Mr Dustmann's research also suggests that wages among existing workers have not been materially affected by immigrants; if anything they have risen.
To the extent that proposed tax cuts accelerate US corporate investment and job creation, the primary impact is likely to be increased upward pressures on wages for existing skilled workers rather than the return of jobs to the hardest hit rural communities that have been the focal point of the Trump phenomenon.
