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The Wage Curve After the Great Recession

Author

Listed:
  • David G. Blanchflower
  • Alex Bryson
  • Jackson Spurling

Abstract

Most economists maintain that the labor market in the United States is ‘tight’ because unemployment rates are low. They infer from this that there is potential for wage-push inflation. However, real wages are falling rapidly at present and, prior to that, real wages had been stagnant for some time. We show that unemployment is not key to understanding wage formation in the USA and hasn’t been since the Great Recession. Instead, we show rates of under-employment (the percentage of workers with part-time hours who would prefer more hours) and the rate of non-employment which includes both the unemployed and those out of the labor force who are not working significantly reduce wage pressures in the United States. This finding holds in panel data with state and year fixed effects and is supportive of a wage curve which fits the data much better than a Phillips Curve. We find no role for vacancies; the V:U ratio is negatively not positively associated with wage growth since 2020. The implication is that the reserve army of labor which acts as a brake on wage growth extends beyond the unemployed and operates from within and outside the firm.

Suggested Citation

  • David G. Blanchflower & Alex Bryson & Jackson Spurling, 2022. "The Wage Curve After the Great Recession," NBER Working Papers 30322, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30322
    Note: IFM LS ME
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    Cited by:

    1. Christou, Tryfonas & Lecca, Patrizio & Salotti, Simone, 2025. "Regional rebound effects of energy efficiency improvements in a spatial general equilibrium framework," Energy Economics, Elsevier, vol. 148(C).
    2. Jovica Pejčić & Olgica Glavaški & Marina Beljić, 2024. "Driving Forces of the Consumer Price Index During the Crises in the Eurozone: Heterogeneous Panel Approach," Economies, MDPI, vol. 12(11), pages 1-19, October.
    3. Oleksiy Kryvtsov & James (Jim) C. MacGee & Luis Uzeda, 2023. "The 2021–22 Surge in Inflation," Discussion Papers 2023-3, Bank of Canada.
    4. Bårdsen, Gunnar & Nymoen, Ragnar, 2024. "U.S. wage-price dynamics, before, during and after COVID-19, through the lens of an empirical econometric model," Memorandum 1/2024, Oslo University, Department of Economics.
    5. Mark Setterfield, 2023. "Inflation and distribution during the post-COVID recovery: a Kaleckian approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 46(4), pages 587-611, October.
    6. Lukas Lehner & Paul Ramskogler & Aleksandra Riedl, 2024. "Beggaring Thy Co-Worker: Labor Market Dualization and the Wage Growth Slowdown in Europe," ILR Review, Cornell University, ILR School, vol. 77(5), pages 659-684, October.
    7. Carlsson, Mikael & Häkkinen Skans, Iida & Nordström Skans, Oskar, 2026. "Outsider Unemployment, Insider Wages, and the Disappearance of the Swedish Wage Curve," Working Paper Series 459, Sveriges Riksbank (Central Bank of Sweden).
    8. Central Bank of Brazil, 2023. "Inflation and labour markets in the wake of the pandemic: the case of Brazil," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation and labour markets, volume 127, pages 35-66, Bank for International Settlements.

    More about this item

    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
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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