The pain of the UK’s Great Recession has been spread more evenly than previous downturns, with falling real wages across the distribution. This column asks why this happened, how it compares with the US experience, and what the prospects are for recovering lost wage gains.
David Blanchflower, Stephen Machin, Monday, May 12, 2014
Jennifer L. Castle, David F. Hendry, Monday, January 13, 2014
During the Great Recession, UK real wages have fallen rather than the usual unemployment reaction. Nevertheless, this column argues that a structural break in the wage inflation/unemployment trade-off has not occurred. There has been a constant relationship between real wages and productivity since 1860. The key to the constancy is to the joint modelling of dynamics, location shifts, relevant variables and non-linearities.