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Conference Paper BHPS-2001 Conference: the 2001 British Household Panel Survey Research Conference, 5-7 July 2001, Colchester, UK

Are pay cuts involuntary?


Publication date

01 Jul 2000


Knowledge of what lies behind earnings changes is crucial to an understanding
of the determination of pay and the distribution of income. A
striking feature of the distribution of wage growth observable from individual
panel surveys is the diversity of wage growth. Many workers enjoy pay
rises, but many appear willing to take pay cuts - in nominal as well as real
terms. This paper examines whether apparent cuts do actually occur, and,
to the extent they occur, attempts to explain why workers might take pay
Furthermore, the notion of downward nominal ridigity in wages relies
fundmentally on the hypothesis that workers dislike nominal cuts. This
paper uses panel data on the pay and satisfaction of a large number of
individuals in Britain in the 1990s to test this assumption.



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