IDEAS home Printed from
   My bibliography  Save this paper

The Lack of Wage Growth and the Falling NAIRU


  • David N.F. Bell
  • David G. Blanchflower


There remains a puzzle around the world over why wage growth is so benign given the unemployment rate has returned to pre-recession levels. It is our contention that a considerable part of the explanation is the rise in underemployment which rose in the Great Recession but has not returned to pre-recession levels even though the unemployment rate has. Involuntary part-time employment rose in every advanced country and remains elevated in many in 2018. In the UK we construct the Bell/Blanchflower underemployment index based on reports of whether workers, including full-timers and those who want to be part-time, who say they want to increase or decrease their hours at the going wage rate. If they want to change their hours they report by how many. Prior to 2008 our underemployment rate was below the unemployment rate. Over the period 2001-2017 we find little change in the number of hours of workers who want fewer hours, but a big rise in the numbers wanting more hours. Underemployment reduces wage pressure. We also provide evidence that the UK Phillips Curve has flattened and conclude that the UK NAIRU has shifted down. The underemployment rate likely would need to fall below 3%, compared to its current rate of 4.9% before wage growth is likely to reach pre-recession levels. The UK is a long way from full-employment.

Suggested Citation

  • David N.F. Bell & David G. Blanchflower, 2018. "The Lack of Wage Growth and the Falling NAIRU," NBER Working Papers 24502, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24502
    Note: IFM LS ME

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ramskogler, Paul, 2021. "Labour market hierarchies and the macro-economy – Do labour market dualities affect wage growth in Europe?," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 154-165.
    2. Bracha, Anat & Burke, Mary A., 2018. "Wage inflation and informal work," Economics Letters, Elsevier, vol. 171(C), pages 159-163.
    3. Bell, David N.F. & Blanchflower, David G., 2019. "The well-being of the overemployed and the underemployed and the rise in depression in the UK," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 180-196.
    4. Jonathan Spiteri & Philip Brockdorff, 2023. "Household Wealth and Inheritance Transfers: Evidence from the Euro Area," Journal of Family and Economic Issues, Springer, vol. 44(3), pages 619-633, September.
    5. Jean-Louis Combes & Pierre Lesuisse, 2022. "Inflation and unemployment, new insights during the EMU accession," International Economics, CEPII research center, issue 172, pages 124-142.
    6. 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.
    7. Zimmermann, Klaus F., 2018. "Reflections on wage-setting," GLO Discussion Paper Series 230, Global Labor Organization (GLO).
    8. Rose Cunningham & Vikram Rai & Kristina Hess, 2019. "Exploring Wage Phillips Curves in Advanced Economies," Discussion Papers 2019-8, Bank of Canada.
    9. Guyonne Kalb & Jordy Meekes, 2019. "Wage Growth Distribution and Decline among Individuals: 2001-2017," RBA Annual Conference Papers acp2019-03, Reserve Bank of Australia, revised Jul 2019.
    10. Roberto Roson & Emanuela Ghignoni, 2023. "A Numerical Simulation of Educational Mismatch in the Italian Labor Market," Working Papers in Public Economics 241, University of Rome La Sapienza, Department of Economics and Law.
    11. Roberto Roson, 2022. "Underemployment in a Computable General Equilibrium Model," Working Papers 2022:17, Department of Economics, University of Venice "Ca' Foscari".
    12. Roberto Roson & Emanuela Ghignoni, 2023. "A Numerical Simulation of Educational Mismatch in the Italian Labor Market," Working Papers 2023: 15, Department of Economics, University of Venice "Ca' Foscari".
    13. Orlov, D. & Postnikov, E., 2022. "Phillips curve: Inflation and NAIRU in the Russian regions," Journal of the New Economic Association, New Economic Association, vol. 55(3), pages 61-80.
    14. Zeina Alsalman, 2023. "Oil price shocks and US unemployment: evidence from disentangling the duration of unemployment spells in the labor market," Empirical Economics, Springer, vol. 65(1), pages 479-511, July.
    15. 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).
    16. James H. Stock & Mark W. Watson, 2020. "Slack and Cyclically Sensitive Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(S2), pages 393-428, December.
    17. Joohun Han & Chanjin Chung, 2021. "Impact of Aging and Underemployment on Income Disparity between Agricultural and Non-Agricultural Households," Sustainability, MDPI, vol. 13(21), pages 1-15, October.

    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:24502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.