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Employment, Output and Real Wages

Author

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  • Bill Russell

    (Reserve Bank of Australia)

  • Warren J. Tease

    (Reserve Bank of Australia)

Abstract

Employment in Australia over the past five years has recorded one of the strongest increases in the post-war period. This experience stands in marked contrast to that of the mid 1970s and early 1980s when demand for labour in Australia was very weak. Recent developments provide an opportunity to look again at the relative importance of two main factors affecting the demand for labour – viz, output and real wages. This paper presents estimates of the relationship between employment, output and real wages over the past two decades. The study therefore covers three major episodes in the labour market: the contractions in employment in the mid 1970s and early 1980s and the strong growth since 1983. The paper finds that real wages have been an important influence on employment in Australia – on average, just as important as output. The results show that a large part of the strength of employment over the past five years has been due to the fall in real wages.

Suggested Citation

  • Bill Russell & Warren J. Tease, 1988. "Employment, Output and Real Wages," RBA Research Discussion Papers rdp8806, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp8806
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    File URL: https://www.rba.gov.au/publications/rdp/1988/8806.html
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    References listed on IDEAS

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    1. P.D. Jonson & R. Battellino & F. Campbell, 1978. "Unemployment: An Econometric Dissection," RBA Research Discussion Papers rdp7802, Reserve Bank of Australia.
    2. Jonson, P D & Mahar, K L & Thompson, G J, 1974. "Earnings and Award Wages in Australia," Australian Economic Papers, Wiley Blackwell, vol. 13(22), pages 80-98, June.
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    5. Peter B. Dixon & B. R. Parmenter & John Sutton, 1978. "Some Causes Of Structural Maladjustment In The Australian Economy," Economic Papers, The Economic Society of Australia, vol. 1(57), pages 10-26, January.
    6. P. Sheehan & B. Derody & P. Rosendale, 1979. "An Assessment of Recent Empirical Work Relevant to Macroeconomic Policy in Australian," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 12(1), pages 33-61, April.
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    Cited by:

    1. David Shepherd & Robert Dixon, 2008. "The Cyclical Dynamics and Volatility of Australian Output and Employment," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 34-49, March.
    2. Fisher, Lance A. & Kingston, Geoffrey, 2022. "Medium-run determinants of real wages in Australia," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1098-1107.
    3. Robert Dixon & John Freebairn & G C Lim, 2004. "An Employment Equation For Australia: 1966-2001," Department of Economics - Working Papers Series 892, The University of Melbourne.
    4. Robert Dixon & John Freebairn, 2007. "Hours of Work: A Demand Perspective," Department of Economics - Working Papers Series 1022, The University of Melbourne.
    5. Geoff Weir, 2018. "Wage Growth Puzzles and Technology," RBA Research Discussion Papers rdp2018-10, Reserve Bank of Australia.
    6. Philip E.T. Lewis & Garry Macdonald, 2004. "Modelling Aggregate Demand for Labour: A Reply to Dowrick and Wells," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 441-444, December.
    7. Gunnar Bårdsen & Stan Hurn & Zoë McHugh, 2002. "A smooth-transition model of the Australian unemployment rate," Working Paper Series 1002, Department of Economics, Norwegian University of Science and Technology, revised 01 Jul 2003.

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