Tyler Cowen quotes from the abstract of a paper by André Kurmann, Erika McEntarfer, and James Spletzer
In our data, only 13 percent of workers who remain with the same firm (job stayers) experience zero change in their nominal hourly wage within a year, and over 20 percent of job stayers experience a reduction in their nominal hourly wage. The lower incidence of downward wage rigidity in the administrative data is likely a function of our broader earnings concept, which includes all monetary compensation paid to the worker (e.g. overtime pay, bonuses), whereas the previous literature has almost exclusively focused on the base rate of pay. When we examine firm labor cost adjustments on both the hours and wage margins, we find that firms have substantially more flexibility in adjusting hours downward than wages. As a result, the distribution of changes in nominal earnings is less asymmetric than the wage change distribution, with only about 6 percent of job stayers experiencing no change in nominal annual earnings, and over 25 percent of workers experiencing a reduction in nominal annual earnings.
A few comments.
1. At the link, it says, “Preliminary and incomplete. Do not cite without permission of authors.”
2. This finding, if established, would only damage macro theory to the extent that bonuses and other fringe benefits are the alternative margins of adjustment. If the alternative margin of adjustment is hours, then that would actually serve to reinforce the macro theory that says that real output falls when nominal GDP growth is slower than expected because nominal wages are sticky.
3. I should note that there also are alternative margins of adjustment that can reduce price stickiness relative to list prices. For example, a restaurant could keep its prices constant but reduce portion sizes or quality. A clothing store could keep its list prices constant but change the size and frequency of discounts.