Hybrideseminar – The illusion cyclicality in entry wages

We show that occupation mobility creates the illusion of cyclical hiring wages. Using Portuguese administrative data, we find that the wages of new hires who remain in the same occupation are no more cyclical than those of existing workers. By contrast, wages of occupation switchers are highly cyclical. We uncover higher wage cyclicality also among workers that remain in the same firm but switch occupations. Our results suggest that the large cyclicality of entry wages, widely documented in the literature, reflects composition effects due to changes in match quality associated with the worker’s occupation rather than wage flexibility. Consistently, we find that wage cyclicality increases, the more different current and previous occupations are in terms of required skills. (joint with Inês Black)