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

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  • Mr. Gee Hee Hong
  • Zsoka Koczan
  • Weicheng Lian
  • Mr. Malhar S Nabar

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.

Suggested Citation

  • Mr. Gee Hee Hong & Zsoka Koczan & Weicheng Lian & Mr. Malhar S Nabar, 2018. "More Slack than Meets the Eye? Recent Wage Dynamics in Advanced Economies," IMF Working Papers 2018/050, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2018/050
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    2. Marco Del Negro & Michele Lenza & Giorgio E. Primiceri & Andrea Tambalotti, 2020. "What's Up with the Phillips Curve?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(1 (Spring), pages 301-373.
    3. N. Cordemans & J. Wauters, 2018. "Are inflation and economic activity out of sync in the euro area?," Economic Review, National Bank of Belgium, issue i, pages 79-96, June.
    4. Raquel Carrasco & J Ignacio García-Pérez & Juan F Jimeno, 2024. "Worker flows and wage dynamics: estimating wage growth without composition effects," Oxford Economic Papers, Oxford University Press, vol. 76(1), pages 94-114.
    5. David N. F. Bell & David G. Blanchflower, 2021. "Underemployment in the United States and Europe," ILR Review, Cornell University, ILR School, vol. 74(1), pages 56-94, January.
    6. Kristin J. Forbes, 2019. "Inflation Dynamics: Dead, Dormant, or Determined Abroad?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(2 (Fall)), pages 257-338.
    7. Frohm, Erik, 2020. "Labor shortages and wage growth," Working Paper Series 394, Sveriges Riksbank (Central Bank of Sweden).
    8. Lehner, Lukas & Ramskogler, Paul & Riedl, Aleksandra, 2022. "Begging thy coworker – Labor market dualization and the slow-down of wage growth in Europe," INET Oxford Working Papers 2022-04, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    9. Roberto Roson, 2022. "Underemployment in a Computable General Equilibrium Model," Working Papers 2022:17, Department of Economics, University of Venice "Ca' Foscari".
    10. Bank of Thailand, 2023. "Labour market structure and wage dynamics in Thailand," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation and labour markets, volume 127, pages 287-296, Bank for International Settlements.
    11. Kiss, Aron & Van Herck, Kristine, 2019. "Short-Term and Long-Term Determinants of Moderate Wage Growth in the EU," IZA Policy Papers 144, Institute of Labor Economics (IZA).
    12. Kristin Forbes, 2019. "Has globalization changed the inflation process?," BIS Working Papers 791, Bank for International Settlements.
    13. Byrne, David & Zekaite, Zivile, 2018. "Missing wage growth in the euro area: is the wage Philips curve non-linear?," Economic Letters 9/EL/18, Central Bank of Ireland.

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