Recent evidence on the relationship between unemployment and wage growth

Daniel Aaronson and Daniel Sullivan

No WP-00-27, Working Paper Series from Federal Reserve Bank of Chicago

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 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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