Wage Changes and Intrafirm Job Mobility over the Business Cycle: Two Case Studies

Despite the many reasons to expect sluggish wage adjustment, recent evidence suggests that real wages are quite procyclical (growing more rapidly during economic expansions than during recessions) and that this wage procyclicality pertains even to workers who stay with the same employer. One possible explanation for these findings is the old hypothesis that a portion of firms' cyclical adjustment of labor costs is achieved not by changing the wages paid in particular jobs, but by changing the quality of labor assigned to those jobs. The authors' analysis of interwar personnel data from the Ford Motor Company and the A.M. Byers Company supports that hypothesis. The authors recognize that case studies of only two firms cannot be definitive, but they conclude that cyclicality in workers' job assignments deserves further attention.