Working Paper

Recent evidence on the relationship between unemployment and wage growth


Abstract: The current expansion has delivered the lowest unemployment rates in decades, yet nominal wage growth has remained relatively contained. This suggests to some a shift in the historical relationship between unemployment and wage growth. We look across the states for more timely evidence of a change in this relationship. We find some evidence that the elasticity of real wage growth with respect to unemployment has fallen recently, a result that is not due to a compositional shift toward college-educated workers. However, evidence of a weakened relationship is itself weak, depending on inherently arbitrary decisions about when a shift may have occurred. In addition, we find that levels of real wage growth associated with high, medium, and low unemployment have remained relatively constant.

Keywords: Unemployment; Wages; Prices;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2000

Number: WP-00-27