The Importance of the Part‐Time and Participation Margins for Real Wage Adjustment

We introduce a decomposition of the growth in real median usual weekly earnings of full‐time wage and salary earners into parts due to earnings increases of those who remain employed, the intensive margin, and due to changes in those who are employed, the extensive margin. The intensive margin is procyclical and dominates during expansions. The extensive margin is countercyclical and important during downturns, especially during the Great and COVID Recessions. The extensive margin is mainly driven by entries from and exits to part‐time employment and nonparticipation, not unemployment.