Falling real wages in the UK
David Blanchflower, Stephen Machin 12 May 2014
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.
There have been unprecedented falls in real wages in the UK since the start of the recession triggered by the financial crisis of 2008. This did not happen in previous economic downturns – median real wage growth slowed down or stalled, but it did not fall. Indeed, in past recessions, almost all workers in both the lowest and highest deciles of the wage distribution experienced growing real wages. It was the unemployed who experienced almost all the pain – they lost their jobs and much of their incomes, and many were unemployed for a long time.
Labour markets Poverty and income inequality
US, unemployment, wages, Inequality, UK, Great Recession, real wages
The real wage–productivity nexus
Jennifer L. Castle, David F. Hendry 13 January 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.
The Great Recession has produced falling real wages (Elsby et al. 2013). There has not been the ‘usual’ unemployment reaction. As such, it may seem that the wage inflation/unemployment trade-off has shifted. Our recent work suggests otherwise (Castle and Hendry 2013).
Labour markets Productivity and Innovation
productivity, real wages, wage inflation