Firms' Wage Adjustments: A Break from the Past
This article examines the Federal Reserve Bank of Cleveland Community Salary Survey from 1957 to 1996 for the impact of inflation on the size of good or bad wage shocks. Most importantly, this exploratory exercise uncovers strong evidence that the pattern of wage changes is not neutral with respect to inflation and other economic conditions. This finding suggests that the influence of errors and corrections, nominal rigidities, or business-cycle influences on wage-setting varies substantially within the labor market. These regularities provide a new window for comparing the behavior of wages with model predictions.