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Wage Flexibility for Skilled and Unskilled Workers: New Evidence on the Norwegian Wage Curve
Author(s) -
Johansen Kåre
Publication year - 1999
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/1467-9914.00101
Subject(s) - economics , unemployment , labour economics , efficiency wage , wage , norwegian , flexibility (engineering) , incentive , order (exchange) , empirical evidence , microeconomics , macroeconomics , linguistics , philosophy , management , finance , epistemology
Empirical evidence is provided in favour of a hypothesis that wages for unskilled workers are more responsive to unemployment than wages for skilled workers. The results imply vigorous wage responsiveness to low levels of unemployment for both groups, while the wage curves become almost entirely flat for unemployment rates above 1.7 percent. One interpretation of this result is that firms have strong incentives to increase wages in order to recruit and retain workers when unemployment is below some critical level. Since unemployed workers will certainly find work, the expected costs of a job loss are small, as are costs associated with an egalitarian wage policy.