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Understanding the Relationship between Real Wage Growth and Labor Market Conditions

Author

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  • Daniel Aaronson
  • Andrew Jordan

Abstract

The authors find that the share of the labor force that is medium-term unemployed (five to 26 weeks unemployed) and the share working part time (less than 35 hours per week) involuntarily are strongly correlated with real wage growth. Moreover, they estimate that average real wage growth would have been between one-half of a percentage point and a full percentage point higher in June 2014 if 2005?07 labor market conditions had been restored, indicating that the slack in the jobs market still weighs heavily on the real wage prospects of U.S. workers.

Suggested Citation

  • Daniel Aaronson & Andrew Jordan, 2014. "Understanding the Relationship between Real Wage Growth and Labor Market Conditions," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Oct.
    • Handle: RePEc:fip:fedhle:00014
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    File URL: http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2014/cfloctober2014_327.pdf
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    Citations

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    Cited by:

    1. Bobeica, Elena & Koester, Gerrit & Lis, Eliza & Nickel, Christiane & Porqueddu, Mario, 2019. "Understanding low wage growth in the euro area and European countries," Occasional Paper Series 232, European Central Bank.
    2. John C. Williams, 2014. "Navigating toward normal: the future for policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    3. Mr. Stephan Danninger, 2016. "What's Up with U.S. Wage Growth and Job Mobility?," IMF Working Papers 2016/122, International Monetary Fund.
    4. R. Jason Faberman & Andreas I. Mueller & Ayşegül Şahin* & Giorgio Topa, 2020. "The Shadow Margins of Labor Market Slack," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(S2), pages 355-391, December.
    5. Kumar, Anil & M. Orrenius, Pia, 2016. "A closer look at the Phillips curve using state-level data," Journal of Macroeconomics, Elsevier, vol. 47(PA), pages 84-102.
    6. Mr. Gee Hee Hong & Zsoka Koczan & Weicheng Lian & Mr. Malhar S Nabar, 2018. "More Slack than Meets the Eye? Recent Wage Dynamics in Advanced Economies," IMF Working Papers 2018/050, International Monetary Fund.

    More about this item

    Keywords

    wages; Labor force; unemployment;
    All these keywords.

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