Understanding U.S. Wage Dynamics

June 15, 2018

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Format: Chicago

Yasser Abdih, and Stephan Danninger. Understanding U.S. Wage Dynamics, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In this paper, we undertake empirical analysis to understand U.S. wage behavior since the beginning of the new millennium. At the macroeconomic level, we find that a productivity-augmented Phillips curve model explains the data fairly well. The model reveals that the upward pressure on wage growth from recent tightening in the labor market has been dampened by a persistent decline in trend labor productivity growth and the share of income that accrues to labor. These themes are reinforced and complemented at the micro-economic level. Lower regional unemployment puts an upward pressure on wages of individuals, although this effect has become weaker since 2008. But there is downward pressure on wages for individuals with occupations that are exposed to automation and offshoring, and in industries with a higher concentration of large firms. All these factors appear to play a role illustrating why it is difficult to single out any one culprit for the observed wage growth moderation.

Subject: Employment, Labor, Labor markets, Production, Productivity, Unemployment, Wages

Keywords: ECI wage, Employment, Global, Globalization, Growth determinant, Growth gap, Labor markets, Nominal wage, Offshoring, Phillips curve, Phillips curve model, Productivity, Routinization, Slack, Unemployment, Wage growth, Wage inflation, Wage Phillips curve, Wage Phillips curve flatter, Wages, Wage-unemployment relationship, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/138
Stock No:

WPIEA2018138
ISBN:

9781484362082
ISSN:

1018-5941

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