Internal Labor Markets Over the Business Cycle

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The purpose of this project is to use newly available within-firm personnel data, including longitudinal employee records, to study internal labor markets over the business cycle. Statistical patterns in real wages over the business cycle and knowledgeable observers' descriptions of employer practices suggest that cyclical variation in firms' hiring standards and promotion rates play a key role in aggregate employment and wage fluctuations. This aspect of the business cycle, however, has never been subjected to quantitative study because of the general unavailability of within-firm data. This project uses personnel records recently acquired from the Ford Motor Company, the Pullman Company, and the A.M. Byers Company to peer inside the "black box" of the internal labor market. This unique opportunity to track individual workers' wages and job assignments within the firm and relate them to conditions in the aggregate labor market will shed new light on both the nature of cyclical labor market fluctuations and the nature of the employment relationship.