Decomposing the Productivity-Wage Nexus in

James Uguccioni and Andrew Sharpe

No 2016-16, CSLS Research Reports from Centre for the Study of Living Standards

Abstract: Standard economic theory predicts that in the long run, productivity growth ought to drive aggregate real wage growth. We consider this prediction in the case of 11 OECD countries, and find that the majority have experienced much slower median real wage growth than labour productivity growth over the 1986-2013 period. We decompose the gap between labour productivity growth and median real wage growth into four components: inequality, data source differences, differences between the prices of output and consumption, and changes to labour’s share of income. The decompositions ultimately show that there is no common cause for the productivity-wage gap, though most countries did see inequality grow and labour’s share of income fall to some degree over our period of study.

Keywords: Productivity; Wages; Income Distribution; Labour Productivity; OECD; Income; Inequality (search for similar items in EconPapers)
JEL-codes: J24 J31 O47 O51 O57 (search for similar items in EconPapers)
Date: 2016-11
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