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Recent developments in wages and the role of wage drift

Author

Listed:
  • Bates, Colm
  • Bodnár, Katalin
  • Schlieker, Kathinka

Abstract

Wage indicators give policymakers a key perspective on the outlook for inflation through the effect of wages on the price-setting of firms and on the consumption behaviour of households. This box studies recent developments in wage indicators, with a particular focus on wage drift, which has recently been in decline. The moderation of wage drift is key to explaining the easing of growth in compensation per employee. This is due to negotiated wage growth taking over the role of achieving inflation compensation from wage drift. The recovery of average hours worked after the pandemic had also been pushing the wage drift up, but this impact has weakened recently. JEL Classification: E24, J30, J52

Suggested Citation

  • Bates, Colm & Bodnár, Katalin & Schlieker, Kathinka, 2024. "Recent developments in wages and the role of wage drift," Economic Bulletin Boxes, European Central Bank, vol. 6.
    • Handle: RePEc:ecb:ecbbox:2024:0006:5
    Note: 2881411
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    More about this item

    Keywords

    compensation per employee; negotiated wages; wage drift; wages;
    All these keywords.

    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
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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