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This paper uses individual data on employment and wages to shed light on the UK’s productivity puzzle. It finds that workforce composition cannot explain the reduction in wages and hence productivity that we observe; instead, real wages have fallen significantly within jobs. Why? One possibility we investigate is higher labour supply in this recession than in the past. Another is lower trade union membership. Alternatively, it might be driven by a fall in productivity as a result of a lower capital-labour ratio. We cannot tell whether productivity is driving wages or vice versa, but understanding why wages have fallen within jobs is at the heart of the UK's productivity puzzle.
Authors
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Research Fellow University College London
Claire is a Research Fellow at IFS, working on the determinants and consequences of participation in childcare and education for parents and children.
Research Economist
Wenchao joined the IFS in 2010 as a Research Economist in the skills and education sector.
Working Paper details
- DOI
- 10.1920/wp.ifs.2013.1311
- Publisher
- IFS
Suggested citation
R, Blundell and C, Crawford and W, Jin. (2013). What can wages and employment tell us about the UK's productivity puzzle?. London: IFS. Available at: https://ifs.org.uk/publications/what-can-wages-and-employment-tell-us-about-uks-productivity-puzzle (accessed: 24 April 2024).
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