Working Paper, Federal Reserve Bank of Atlanta 2012-16
This paper investigates the change in wages associated with a spell of unemployment. The novelty lies in using monthly data from the Survey of Income and Program Participation (SIPP) to analyze the dynamics of those wage changes across different business cycles. The level of education or the sector of re-employment affects the change in wages following an unemployment spell differently across different downturns. The degree of wage rigidity varies across recessions; wage changes preand post-unemployment are sometimes procyclical and sometimes countercyclical. These results may be useful for understanding the different aggregate employment dynamics observed across downturns and recoveries.