What can wages and employment tell us about the UK's productivity puzzle?

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As in many European countries, labour productivity in the UK has been stagnant since the start of the Great Recession. This article uses individual data on employment and wages to try to understand whether real wage flexibility can help shed light on the UK's productivity puzzle. It finds, perhaps unsurprisingly, that workforce composition cannot explain the reduction in wages and hence productivity that we observe, even compared to previous recessions; instead, real wages have fallen significantly within jobs this time round. Why? One possibility we investigate is that the labour supply in the UK is higher compared to previous recessions.


Original languageEnglish
Pages (from-to)377-407
JournalThe Economic Journal
Issue number576
Early online date23 May 2014
Publication statusPublished - May 2014