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Federal Reserve Bank of Chicago
Working Paper Series
Worker insecurity and aggregate wage growth
Daniel Aaronson
Daniel G. Sullivan

To adequately evaluate claims that increased worker insecurity had reduced wage growth in the 1990s, research must answer two questions: (1) Has worker insecurity increase?, and (2) Does worker insecurity reduce wage growth? Examining data on displacement rates from the Displaced Workers Surveys and data on workers' perceptions of job security from the General Social Survey, we conclude that worker insecurity has been high in the 1990s relative to what would have been expected on the basis of the falling unemployment rate. Moreover, examining the relationship between measures of displacement and aggregate wage growth using panel data covering the 50 states over the years 1979 to 1997, we conclude that worker insecurity does reduce wage growth for classes of workers. However, we only find evidence of an effect of insecurity on wage workers without college degrees and the increase in insecurity during the 1990s is limited mainly workers with college degrees. Thus we concluded that increased worker insecurity many not have had a large effect on aggregate wage growth.

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Daniel Aaronson & Daniel G. Sullivan, Worker insecurity and aggregate wage growth, Federal Reserve Bank of Chicago, Working Paper Series WP-99-30, 1999.
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Keywords: Displaced workers ; Job security ; Unemployment ; Wages
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