How wages are set: evidence from a large survey of firms

Release date
09/02/2016
Reference
DP2016/03
Authors
Jed Armstrong; Miles Parker
ISSN
1177-7567

This paper studies the micro-foundations of wage dynamics in New Zealand, using a large behavioural survey. The majority of firms adjust wages annually, with smaller firms more likely to set wages less frequently. Firms have limited synchronicity in wage setting, with over half of firms reporting that they do not have a fixed month for wage changes. There are some links from inflation and minimum wage legislation to wage adjustments; in both cases the link is stronger as firm size increases.