What is the most flexible component of wage bill adjustment? Evidence from Belgium |
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| Authors: | Catherine Fuss |
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| Institution: | 1. Department of Chemistry, Youngstown State University, Youngstown, OH 44555, USA;2. Instituto de Química Médica (IQM-CSIC), Juan de la Cierva, 3, E-28006 Madrid, Spain;1. King Abdullah University of Science and Technology (KAUST), Biological and Environmental Sciences & Engineering Division (BESE), Thuwal 23955-6900, Saudi Arabia;2. King Abdullah University of Science and Technology (KAUST), Center for Numerical Porous Media (NumPor), Thuwal 23955-6900, Saudi Arabia;3. Weierstrass Institute for Applied Analysis and Stochastics, Berlin 10117, Germany;4. Curtin University, Applied Geology Department, Western Australian School of Mines, Faculty of Science and Engineering, Perth, Western Australia 6845, Australia;5. Fraunhofer Institute for Industrial Mathematics, Flows and Materials Simulation Department, Kaiserslautern 67663, Germany;1. State Key Laboratory of Oil and Gas Reservoir Geology and Exploitation (Southwest Petroleum University), Chengdu 610500, China;2. Heilongjiang Oil and Gas Reservoir Forming Mechanism and Resource Evaluation Key Laboratory (Northeast Petroleum University), Daqing 163318, China;3. Exploration and Development Research Institute, PetroChina Jilin Oilfield Company, Songyuan 138000, China |
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| Abstract: | This paper decomposes wage bill changes at the firm level into components due to wage changes, and components due to flows of employment. It relies on an administrative matched employer–employee dataset of individual earnings merged with firms' annual accounts for Belgium over the period 1997–2001. The results are in line with what one would expect in a downward wage rigidity environment. On average, wage bill contractions result essentially from employment cuts in spite of wage increases. Wage growth of job stayers is moderated but positive; and wages of entrants compared with those of incumbents are no lower. The labour force cuts are achieved through both reduced entries and increased exits, due to more layoffs, especially in smaller firms, and wider use of early retirement, especially in manufacturing. In addition, the paper points out the role of overtime hours, temporary unemployment and interim workers in adapting hours worked to economic circumstances. |
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