Who bear the burden of wage cuts? Evidence from Finland during the 1990s

Abstract

This paper explores the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s. Centralized wage freezes together with a positive inflation rate produced real wage cuts for a large proportion of workers during the worst recession years of the early 1990s. In this sense, centralized bargaining shaped the adjustment. The results from micro data reveal that the full-time workers have had a lower likelihood of wage cuts compared with part-time workers. Declines in wages have also been more common in small plants. In addition, there is an important transitory component in wage cuts.micro-level, wages, adjustment