Long-term unemployment and US State wages

Mark Partridge and Dan Rickman

Applied Economics Letters, 1997, vol. 4, issue 8, 465-468

Abstract: During the 1980s, rising European unemployment without rapidly subsiding wage pressure challenged conventional labour market theories. One explanation is that a greater proportion of unemployment that is long-term unemployment (LTU) reduces downward wage pressure. Empirical evidence regarding this proposition is mixed, where it is possible the relationship varies across countries. Hence, this study examines the LTU-wage relationship for the US using 1976-91 state-level data. The results suggest that a greater LTU proportion is positively related to wages, but the result should be interpreted cautiously. Thus, US labour markets may be 'tighter' than previously suspected.

Date: 1997
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DOI: 10.1080/758536626

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