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.
Find the working paper here.
Figure. Changes to UK output, employment and hours

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 Associate
Wenchao is an Assistant Professor at the University of Sussex and an IFS Research Associate.
Journal article details
- DOI
- 10.1111/ecoj.12138
- Publisher
- Wiley
- Issue
- May 2014
Suggested citation
R, Blundell and C, Crawford and W, Jin. (2014). 'What can wages and employment tell us about the UK's productivity puzzle?' (2014)
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