Wage Flexibility In Britain: Some Micro And Macro Evidence
Source: Bank of England
This paper uses the British New Earnings Survey (NES) to derive both macro and micro measures of wage rigidities. The data set spans the 1975-2000 period, with wage observations covering approximately 1% of the British workforce. Using this data set, the authors consider whether wages have become more flexible in recent years. Evidence drawn from macroeconomic wage equation estimates suggests that, while the relationship between wages and unemployment seems to have changed, the responsiveness of wages to unemployment rates has declined in the 1990s. In contrast to previous findings, these results suggest that wages have become less flexible.