Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
권호 표지
DOI QR코드

DOI QR Code

Nominal Wage Rigidity and Employment Volatility

명목임금의 경직성과 고용변동성

  • Hwang, Sanghyun (Department of Economics and Finance, Sangmyung University) ;
  • Lee, Jin-Young (Department of Economics, Kangwon National University)
  • 황상현 (상명대학교 경제금융학부) ;
  • 이진영 (강원대학교 경제정보통계학부)
  • Received : 2019.11.30
  • Accepted : 2019.12.24
  • Published : 2019.12.30
Download PDF
⟨ Previous Next ⟩

Abstract

Using Korean Labor and Income Panel Study data, this paper estimates nominal wage rigidity in Korea by industry from 2005 to 2017 and evaluates the level of inefficiency of Korean labor market. And, after estimating employment volatility by industry using the Labor Force Survey at Establishments data for Korea, we combine the nominal wage rigidity and the employment volatility estimates and analyze the effect of nominal wage rigidity on employment volatility in Korea from 2011 to 2017. If the level of wage rigidity is high, it may be hard for the labor market to be in the equilibrium, and therefore, the market may have inefficiency. We find that the inefficiency of the labor market in Korea have increased from 2005 to 2017 and the industry of accommodation and food service activities has the highest level of inefficiency over the period. We also find that one-percent-point increase in wage rigidity increases employment volatility by 2.3-2.9 percent and the positive effect is bigger for workers with part-time and temporary jobs. The result implies that firms may adjust their labor costs by changing the number of casual workers, rather than permanent workers, when the labor market suffers from a high level of wage rigidity.

Keywords

References

  1. Byun, Yanggyu (2010), "Measuring Labor Market Flexibility and Security Based on Principal Components", Quarterly Journal of Labor Policy, 10(4), 1-37. https://doi.org/10.22914/JLP.2010.10.4.001
  2. Cho, Seung-Mo (2018), "Working Conditions and Firm Survival", Asia-Pacific Journal of Business, 9(4), 157-180.
  3. Elsby, M., D. Shin and G. Solon (2016), "Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain" Journal of Labor Economics, 34(S1), 246-291.
  4. Hong, Sung-Bin and Sang-Yun Lee (2018), "Analysis of Change in the Management Efficiency of Social Enterprises: Focus on Enterprises Employing Vulnerable Social Groups in Gyeonggi-do", Asia-Pacific Journal of Business, 9(3), 51-69.
  5. Kim, Yeonjung (2019, October 29), "Casual Workers Increased by 870,000 Workers, But the Actual Increase Was 370,000 Workers", Yonhapnews Available from https://www.yna.co.kr/view/AKR20191029090800002 (accessed November 30, 2019)
  6. Lee, Jungmin and Seungjin Hwang (2016), "The Effect of the Minimum Wage on Employment in Korea", Korean Journal of Labour Economics, 39(2), 1-34. https://doi.org/10.1016/j.labeco.2016.01.005
  7. Minimum Wage Commission, Minimum Wage Level by Year, Available from http://www.minimumwage.go.kr/stat/statMiniStat.jsp
  8. Nam, Jae-Wook, Min-Jee Keh, and Han-Na Cho (2016), "The Flexicurity in Korea: Trends and Agenda", Journal of Critical Social Welfare, 50, 76-125.
  9. Park, Moonsoo, Kyounghee Lee and Jongho Kim (2017), "The Effects of Economic Policy on Individual Income Volatility", Quarterly Journal of Labor Policy, 17(3), 77-112. https://doi.org/10.22914/JLP.2017.17.3.003
  10. Park, Seonyoung, Donggyun Shin (2014), "The Nature and Extent of Nominal and Real Wage Flexibility in Korea", Korean Journal of Labour Economics, 37(2), 1-47.
  11. Shin, Donggyun (2005), "Firms' Optimal Adjustments to Demand Shocks: Wages, Workers, and Hours", Korean Journal of Labour Economics, 28(1), 29-60.
  12. Sufian, Fadzlan and Fakarudin Kamarudin (2014), "Efficiency and Returns to Scale in the Bangladesh Banking Sector: Empirical Evidence from the Slack-Based DEA Method", Asia-Pacific Journal of Business, 5(1), 1-12.
  13. Wooldridge, Jeffrey M. (2010), Econometric Analysis of Cross Section and Panel Data (2nd ed.), Cambridge, MA: MIT Press, 723-736