Documents Villanueva, Ernesto 5 results

"We study the impact of (widespread) downward wage rigidity on the flows from employment to non-employment at the onset of the Great Recession. Downward wage (growth) rigidity is due to the fact that sector-level collective agreements in Spain are automatically extended to all firms, setting wage minima for workers in the same province-industry-skill cell. We identify the impact of wage rigidity on employment because, unlike settled ones, newly bargained contracts can adjust to aggregate shocks. Using the exact dates of bargaining periods of all sector-level contracts in Spain, we find that agreements reached after the fall of Lehman Brothers were for an average wage growth of 1.8%, while agreements signed before 15 September 2008 were for mean wage increases of 3.1%. Matching information on collective agreements with longitudinal Social Security records on workers, we document two findings. Firstly, the probability of job loss between 2009 and 2010 was 1 percent higher among workers covered by agreements signed before the fall of Lehman Brothers than among workers covered by contracts signed afterwards. Secondly, the analysis of a subsample of contracts with information about the exact province-industry-skill level minimum wage suggests that the impact of date of contract signature on wage changes and employment losses is confined to workers whose pre-recession earnings were below 1.2 times the contract-specific minimum wage. Those findings are consistent with the hypothesis that the staggering of contracts and the inability to renegotiate contracts amplify aggregate shocks. We end with a discussion of whether those results can be extrapolated to other sample periods."

"The author develops a model predicting that in a labor market that attaches a wage premium to jobs with a disamenity (a compensating wage differential), the premium's upper bound will be defined by the average wage change of voluntary job movers whose consumption of the disamenity rises as a result of their move; its lower bound, by the wage change of those whose consumption of the disamenity falls. These predictions will not hold if, as predicted by a "segmented" labor market model, the labor market attaches a wage penalty to workplace disamenities. Using longitudinal data on job characteristics and wages in Germany in 1984-2001, the author estimates the market returns to four workplace disamenities: heavy workload, job insecurity, poor hours regulation, and a mismatch between skills possessed and skills required. The results broadly support the existence of compensating differentials in the German labor market."

"In several OECD countries employer federations and unions fix skill-specific wage floors for all workers in an industry. One view of those "explicit" contracts argues that the prevailing wage structure reflects the labor market conditions back at the time when those contracts were bargained, with little space for renegotiation. An alternative view stresses that only workers close to the minima are affected by wage floors and that the wage structure reacts to current labor market conditions. We disentangle both models using a novel dataset that combines more than 1,000 signature dates and 15,000 wage floors set in the metalworking industry with labor market histories of metalworkers drawn from Social Security records in Italy and Spain. An increase in the contemporaneous local unemployment rate of 1 p.p. diminished contemporaneous mean wages by about 0.45 p.p. between 2005 and 2013 in both countries. Instead, a 1 p.p. higher unemployment rate back at the time of contract renewal reduced wages by 0.07 p.p., an impact driven by wages close to the negotiated wage floors. Even though the evidence for earlier periods is mixed in Italy, the results do not support the view that the wage structure reflects labor market conditions at the time of bargaining. The response of wages to local unemployment was driven by reductions in complements and employee churning, although the elasticity falls short of the prediction of an off-the-shelf bargaining model."

"This paper studies the impact of downward wage rigidity on wage dynamics and employment flows after the outbreak of major recessions over the last 30 years in Spain. Downward wage rigidity stems from collective agreements, which set province-industry-skill specific minimum wage floors for all workers. We show that agreements signed after the onset of the 1993 and 2009 recessions settled on average for a 1.0-1.5 pp lower nominal wage growth than the agreements signed before. By exploiting variation in the renewal of collective contracts and leveraging Social Security data and the distribution of the worker-level bite of minimum wage floors, we find that in both recessions actual wage growth was indeed higher among workers covered by collective contracts signed during expansions and with wages close to the floors. However, employment responses vary across recessions. In the low-inflation recession of 2009, job losses are highly persistent and entirely driven by workers with pre-recession wages close to the minimum wage floors while in the high inflation recession of 1993, job losses were limited and short-lived. Using Labour Force Survey data in a similar setting we find that downward wage rigidity during the first year of the COVID-19 pandemic triggered adjustments at the intensive margin of labor (short time work). Our findings highlight the interplay between rigidity at different parts of the wage distribution, macroeconomic environment and labor market institutions and identify conditions under which collective contract staggering and the inability to renegotiate may amplify aggregate shocks."