Working Paper: NBER ID: w24266
Authors: Grace Weishi Gu; Eswar Prasad
Abstract: Employer-provided nonwage benefit expenditures now account for one-third of U.S. firms' labor costs. We show that a broad measure of real labor costs including such benefit expenditures has become countercyclical during 1982-2014, contrary to the conventional view that labor costs are procyclical. Using BLS establishment-job data, we find that even real wages, the main focus of prior literature, have become countercyclical. Benefit expenditures are less rigid than nominal wages, although both components of labor costs have become more rigid. These rigidities, along with the rising relative importance of aggregate demand shocks (including the financial crisis), help explain countercyclical labor costs.
Keywords: No keywords provided
JEL Codes: E24; E32; J3; J32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real GDP growth (O49) | real hourly wage growth (J31) |
| real GDP growth (O49) | nonwage benefit expenditures (J32) |
| real GDP growth (O49) | overall compensation (M52) |
| real GDP growth (O49) | labor costs (J30) |
| economic downturns (F44) | labor costs (J30) |