More Slack than Meets the Eye? Recent Wage Dynamics in Advanced Economies

45 Pages Posted: 15 Nov 2018

See all articles by Gee Hee Hong

Gee Hee Hong

International Monetary Fund (IMF)

Zsoka Koczan

International Monetary Fund (IMF)

Weicheng Lian

International Monetary Fund (IMF)

Malhar Nabar

International Monetary Fund (IMF)

Date Written: March 2018

Abstract

Nominal wage growth in most advanced economies remains markedly lower than it was before the Great Recession of 2008-09. This paper finds that the bulk of the wage slowdown is accounted for by labor market slack, inflation expectations, and trend productivity growth. In particular, there appears to be greater slack than meets the eye. Involuntary part-time employment appears to have weakened wage growth even in economies where headline unemployment rates are now at, or below, their averages in the years leading up to the recession.

Keywords: Economic models, Employment, Labor markets, Unemployment, Wage increases, Monetary policy, wage growth, involuntary part-time employment, Monetary Policy (Targets, Instruments, and Effects), Labor Force and Employment, Size, and Structure

JEL Classification: E31, E52, J21, J31

Suggested Citation

Hong, Gee Hee and Koczan, Zsoka and Lian, Weicheng and Nabar, Malhar, More Slack than Meets the Eye? Recent Wage Dynamics in Advanced Economies (March 2018). IMF Working Paper No. 18/50. Available at SSRN: https://ssrn.com/abstract=3285234

Gee Hee Hong (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Zsoka Koczan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Weicheng Lian

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Malhar Nabar

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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