Economics in a picture
Worker flows have an important role in explaining aggregate real wage variation
Aggregate real wage variation is influenced by job restructuring and worker flows. The decomposition of aggregate wage growth at the firm level suggests that, in general, aggregate real wage growth is lower than the wage variation of job stayers. Therefore, job restructuring (entry and exit of firms) and worker flows (worker accessions and separations) affect real wage growth negatively.
Worker flows have an important role in explaining within-firm real wage variation. Newly hired workers earn on average lower wages than job stayers, contributing negatively to aggregate wage variation. Worker separations contribute positively to real wage variation, suggesting that separating workers earn less on average than job stayers. The analysis of the role of worker flows on aggregate real wage growth also indicates that the within component is substantially affected during the economic downturn.
For more details see Sónia Félix and Pedro Portugal (2019) “How do firm dynamics and worker mobility influence real wage growth?” in Portuguese economic growth: A view on structural features, blockages and reforms, Banco de Portugal.
Prepared by Sónia Félix and Pedro Portugal. The analyses, opinions, and findings expressed above are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.
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