Wages and labor market flows in times of the corona crisis

Abstract

The paper discusses two major dimensions of labor market adjustment to crisis conditions in Russia in 2020. Price adjustment manifests itself through changes in wages, and quantitative adjustment — in hiring and separations. Most general conclusion is that, in 2020, the former dominated, while the latter also took place. Our analysis shows deep but very selective and short run fall in wages. Exposure to downward wage flexibility was a function of type of economic activity and type of residence, not of demographic characteristics or education. Freezing new hires became the main instrument for quantitative adjustment, though the intensity of separations decreased as well. Reduction in both components of labor turnover means slower workers’ reallocation and preservation of the old economic structure. If during the previous crises legislative and administrative measures slowed down reductions in personnel, which could be beneficial for employers, in the covid case employers seek to preserve the matching capital needed for fast and efficient recovery and growth.