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Recent evidence on the relationship between unemployment and wage growth

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  • Daniel Aaronson
  • Daniel G. Sullivan

Abstract

The current expansion has delivered the lowest unemployment rates in decades, yet nominal wage growth has remained relatively contained. This suggests to some a shift in the historical relationship between unemployment and wage growth. We look across the states for more timely evidence of a change in this relationship. We find some evidence that the elasticity of real wage growth with respect to unemployment has fallen recently, a result that is not due to a compositional shift toward college-educated workers. However, evidence of a weakened relationship is itself weak, depending on inherently arbitrary decisions about when a shift may have occurred. In addition, we find that levels of real wage growth associated with high, medium, and low unemployment have remained relatively constant.

Suggested Citation

  • Daniel Aaronson & Daniel G. Sullivan, 2000. "Recent evidence on the relationship between unemployment and wage growth," Working Paper Series WP-00-27, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-00-27
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    Cited by:

    1. Kapetanios, George & Price, Simon & Tasiou, Menelaos & Ventouri, Alexia, 2021. "State-level wage Phillips curves," Econometrics and Statistics, Elsevier, vol. 18(C), pages 1-11.

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    Keywords

    Unemployment; Wages; Prices;
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