Real Wages and Unemployment in the Big Squeeze

25 Pages Posted: 23 May 2014

See all articles by Paul Gregg

Paul Gregg

University of Bath - Department of Social and Policy Sciences

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); London School of Economics & Political Science (LSE) - Department of Economics

Mariña Fernández‐Salgado

University of Bath

Date Written: May 2014

Abstract

UK real wage growth has slowed down, stagnated and recently turned sharply negative. We document the nature of real wage changes across the wage distribution over the last three decades, showing that recent patterns represent a distinct break of trend that pre‐dates the onset of recession. We explore whether unemployment has become a stronger moderating influence on real wage growth and report, using aggregate economy‐wide and regional panel data, that real wage–unemployment sensitivities have become stronger in the period from 2003 onwards. Finally, we offer some assessment of possible drivers of this increased sensitivity of real wages to unemployment.

Suggested Citation

Gregg, Paul and Machin, Stephen J. and Fernández‐Salgado, Mariña, Real Wages and Unemployment in the Big Squeeze (May 2014). The Economic Journal, Vol. 124, Issue 576, pp. 408-432, 2014, Available at SSRN: https://ssrn.com/abstract=2441392 or http://dx.doi.org/10.1111/ecoj.12139

Paul Gregg (Contact Author)

University of Bath - Department of Social and Policy Sciences ( email )

Claverton Down
Bath, BA7 2AY
United Kingdom

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Mariña Fernández‐Salgado

University of Bath

Claverton Down
Bath, BA2 7AY
United Kingdom

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