Non-Base Wage Components as a Source of Wage Adaptability to Shocks: Evidence from European Firms, 2010-2013

33 Pages Posted: 19 Jun 2018

See all articles by Jan Babecký

Jan Babecký

Czech National Bank (CNB)

Clemence Berson

Banque de France

Ludmila Fadejeva

Latvijas Banka

Ana Lamo

European Central Bank (ECB)

Petra Marotzke

Deutsche Bundesbank

Fernando Martins

Bank of Portugal - Research Department; University of Lisbon - School of Economics and Management; Universidade Lusíada, Lisboa

Pawel Strzelecki

National Bank of Poland; Warsaw School of Economics (SGH)

Multiple version iconThere are 2 versions of this paper

Date Written: June 15, 2018

Abstract

This paper provides evidence on the role of non-base wage components as a channel for firms to adjust labour costs in the event of adverse shocks. It uses data from a firm-level survey for 25 European countries that covers the period 2010–2013. We find that firms subject to nominal wage rigidities, which prevent them from adjusting base wages, are more likely to cut non-base wage components in order to adjust labour costs when needed. Firms thus use non-base wage components as a buffer to overcome base wage rigidity.We further show that while non-base wage components exhibit some degree of downward rigidity, they do so to a lesser extent than base wages.

Keywords: downward nominal wage rigidity, bonuses, firm survey, European Union

JEL Classification: J30, J32, C81, P5

Suggested Citation

Babecky, Jan and Berson, Clemence and Fadejeva, Ludmila and Lamo, Ana and Marotzke, Petra and Martins, Fernando and Strzelecki, Pawel, Non-Base Wage Components as a Source of Wage Adaptability to Shocks: Evidence from European Firms, 2010-2013 (June 15, 2018). ECB Working Paper No. 2158, Available at SSRN: https://ssrn.com/abstract=3198520

Jan Babecky

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Clemence Berson

Banque de France ( email )

Paris
France

Ludmila Fadejeva

Latvijas Banka ( email )

Riga
Latvia

Ana Lamo (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Petra Marotzke

Deutsche Bundesbank

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Fernando Martins

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal

University of Lisbon - School of Economics and Management ( email )

Rua do Quelhas, n.º 6
Lisbon, 1200-781
Portugal

Universidade Lusíada, Lisboa ( email )

Rua da Junqueira, 188 - 198
Lisboa, 1349-001
Portugal

Pawel Strzelecki

National Bank of Poland

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
231
PlumX Metrics