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Nominal Wage Rigidity in the United Kingdom

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  • Smith, Jennifer C

Abstract

This paper studies the degree of downward rigidity in nominal wages in the United Kingdom using micro-data. Around 9% of employees who remain in the same job from one year to the next have zero pay growth. But on investigating the causes of rigidity we find that up to nine-tenths can be attributed to "symmetric" causes (such as contracts and menu costs) or to error. Thus only 1% of workers have pay that may be downwardly rigid. This suggests asymmetric, downward rigidity is not large enough to have serious macroeconomic consequences. The labour market provides almost no evidence to support a positive inflation target.

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  • Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages 176-195, March.
  • Handle: RePEc:ecj:econjl:v:110:y:2000:i:462:p:c176-95
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