Want a raise the next time a recession happens? Get a job with Uncle Sam.
People who take a job with the government during a recession tend to see more long-term wage growth compared to those who take a job with the government when the economy is expanding, according to a paper by Duke University researchers recently distributed by the National Bureau of Economic Research.
When the unemployment rate increases one percentage point, new college graduates and other employees working for the government see a long-term wage growth of 1% compared to those who work during a “boom,” the report said.
Long-term wage growth refers to how much an employee’s salary increases over time. In this case, that growth takes three to four years but continues for 10 years thereafter. The researchers looked at 24 years of U.S. federal government employee data for college graduates and other new employees.
Comparatively, individuals who work in the private sector during a recession see long-term negative effects on their wages. Citing 2012 Canadian college graduate data, researchers said every 1 percentage point increase in the unemployment rate, average wages dropped 1.5% initially and then recovered. Wages stabilized after 10 years.
Government hires also see a wage dip during recessions, but their wages bounce back much faster, after just a year, the Duke researchers found.
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Companies are more likely to cut wages than employment as a first reaction to a recession, according to another 2017 research report from the IZA World of Labor, a research network run by the Institute for the Study of Labor, an independent economic research firm. Companies can also cut bonuses, the report suggested.
The good news: The U.S. is on a record-breaking track for the longest amount of time without a recession, going on eight years and 10 months in May (the longest expansionary period was 10 years during the 1990s).
Some experts, however, say a recession is coming. Ray Dalio, the billionaire founder of investment firm Bridgewater Associates, said earlier this year the risks of a recession are rising and he expects one in the next 18 to 24 months.
“Frankly, it seems to be inappropriate oversight to not be talking about the chances of a recession and what that recession might look like prior to the next election,” he said.
Source : MTV
