Who bears the burden of wage cuts? Evidence from Finland during the 1990s

Purpose - This paper aims to explore the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s.Design methodology approach - Estimation of econometric models for the probability of wage cuts using individual-level wage survey data from the payroll records of the Finn...

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Bibliographic Details
Published in:International journal of manpower 2007-05, Vol.28 (2), p.100-121
Main Authors: Böckerman, Petri, Laaksonen, Seppo, Vainiomäki, Jari
Format: Article
Language:English
Subjects:
Bonuses
Collective bargaining
Econometrics
Economic statistics
Economic theory
Employees
Employers
Employment
Finland
Labor contracts
Labor force
Labor market
Macroeconomics
Manual workers
Manufacturing
Market segments
National economy
Pay policies
Payroll records
Private sector
Private sector organizations
Productivity
Shift work
Studies
Wage rates
Wages & salaries
Working conditions
Working hours
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Summary:Purpose - This paper aims to explore the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s.Design methodology approach - Estimation of econometric models for the probability of wage cuts using individual-level wage survey data from the payroll records of the Finnish employers' organizations.Findings - Centralized nominal wage freezes together with a positive inflation rate produced real wage cuts for a large proportion of workers during the worst recession years of the early 1990s. Hence, centralized bargaining shaped the adjustment. The share of nominal wage cuts does not increase with falling inflation, which is consistent with downward wage rigidities. Full-time workers have had a lower likelihood of wage cuts compared with part-time workers. Declines in wages have also been more common in small plants. There is an important transitory component in wage cuts.Practical implications - Provides useful information about the adjustment of wages at the individual level.Originality value - Few papers have analysed individual and employer characteristics that account for wage cuts. The paper contributes to the literature on wage rigidity.
ISSN:0143-7720
1758-6577
DOI:10.1108/01437720710747947