About: Faced with temporary revenue shocks, employers may implement wage reductions — a common response to COVID-19 for U.S. universities. I provide a framework for optimal reductions when labor is inelastic wherein a planner balances “minimizing the pain” and “sharing the sacrifice.” I show that for a broad class of utility functions the optimal schedule includes (1) a cutoff wage below which the reduction is zero and (2) weakly progressive reduction rates above the cutoff wage. I illustrate the results using data from a large U.S. university.   Goto Sponge  NotDistinct  Permalink

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  • Faced with temporary revenue shocks, employers may implement wage reductions — a common response to COVID-19 for U.S. universities. I provide a framework for optimal reductions when labor is inelastic wherein a planner balances “minimizing the pain” and “sharing the sacrifice.” I show that for a broad class of utility functions the optimal schedule includes (1) a cutoff wage below which the reduction is zero and (2) weakly progressive reduction rates above the cutoff wage. I illustrate the results using data from a large U.S. university.
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  • United States
  • 1776 establishments in the United States
  • Countries in North America
  • English-speaking countries and territories
  • G20 nations
  • G7 nations
  • Federal constitutional republics
  • Former confederations
  • Member states of the United Nations
  • Member states of NATO
  • States and territories established in 1776
  • Superpowers
  • Group of Eight nations
  • Former British colonies
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