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Abstract:

cover
CEP Real Wages Update
Slowing UK Wage Growth
David Blanchflower and Stephen Machin
February 2016
Paper No' CEPRWU004:
Full Paper (pdf)

Tags: uk wage growth; labour market; government policy; average weekly earnings (awe); inflation; unemployment

We have previously examined the path of nominal and real wages in the UK (Blanchflower and Machin, 2014a, 2014b, 2014c). In that work, we expressed the view that in recent years there has been sufficient slack in the labour market to mean there has been little prospect of significant growth in nominal wages. The latest data continue to support that conclusion. After a short-lived upwards blip last year, there is no evidence that nominal wage growth is picking up as it continues to grow at or around 2%, even though the unemployment rate is approaching 5%. Following what seems to be a temporary boost to wage growth due to the fall in unemployment, wage growth has subsequently weakened and turned back down again.