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Wage growth and productivity growth: the myth and reality of 'decoupling'

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Abstract

Employees in the UK are not being denied their fair share of economic growth, according to research by João Paulo Pessoa and John Van Reenen. Their investigation of claims that wage growth has become 'decoupled' from productivity growth finds that decoupling has been overstated and cannot be used to justify redressing the balance between wages and profits. They show that the share of UK income going to labour is basically the same now as it was 40 years ago. The real problem is inequality among employees: wage inequality has risen massively since the late 1970s. Improving skills in the bottom half of the education distribution will boost productivity and real wages.

Suggested Citation

  • Joao Paulo Pessoa & John Van Reenen, 2013. "Wage growth and productivity growth: the myth and reality of 'decoupling'," CentrePiece - The magazine for economic performance 401, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepcnp:401
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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