European Parliament Library

Understanding U.S. Wage Dynamics, Yasser Abdih, Stephan Danninger

In this paper, we undertake empirical analysis to understand U.S. wage behavior since the beginning of the new millennium. At the macroeconomic level, we find that a productivity-augmented Phillips curve model explains the data fairly well. The model reveals that the upward pressure on wage growth from recent tightening in the labor market has been dampened by a persistent decline in trend labor productivity growth and the share of income that accrues to labor. These themes are reinforced and complemented at the micro-economic level. Lower regional unemployment puts an upward pressure on wages of individuals, although this effect has become weaker since 2008. But there is downward pressure on wages for individuals with occupations that are exposed to automation and offshoring, and in industries with a higher concentration of large firms. All these factors appear to play a role illustrating why it is difficult to single out any one culprit for the observed wage growth moderation
Table Of Contents
Cover -- CONTENTS -- ABSTRACT -- I. INTRODUCTION -- II. MACRO ANALYSIS -- A. Determinants of Wage Growth -- B. An Alternative Approach-Same Results -- C. Properties and Key Messages of the Baseline Model -- D. Robustness -- III. MICRO ANALYSIS: -- A. Structural and Cyclical Determinants of U.S. Wages -- B. Data Description -- C. Empirical Strategy, Results, and Robustness Checks -- IV. CONCLUDING REMARKS -- REFERENCES -- FIGURES -- 1. Labor Market Outcomes -- 2. Wages and Slack -- 3. Stationarity vs Non-Stationarity Combinations -- 4a. Model's Fit and Forecast -- 4b. Model's Residuals -- 5. Recursive Estimates and Stability Tests -- 6. Decomposing ECI Growth -- 7. Alternative Measures of Labor Market Slack -- 8a. Decomposition ECI Growth: U6 Model -- 8b. Decomposition ECI Growth: UST Model -- 9a. The Natural Rate of Unemployment -- 9b. Unemployment Gap: CBO vs Kalman Filter -- 10. Aggregate Annual Wage growth: CPS and other Data Sources -- 11. Routinization and Offshorability Scores Across Education Groups: 1997-2017 -- TABLES -- 1. Cointegration Analysis of the Baseline VAR Model -- 2. ECI Growth: General-to-Specific Modeling -- 3. ECI growth: Final Model -- 4. ECI growth: Alternative Slack Measures -- 5. ECI growth: Non-Linearity and the Kalman Filter -- 6a. Johansen Cointegration Analysis for VARs with Alternative Wage Measures -- 6b. Final Models for Alternative Wage Measures -- 7. Structural Determinants of Wages: 2000-2017 -- 8. Structural Determinants of Wages-Robustness Checks -- 9. Wage and Labor Market Slack: 1997-2017 -- Appendix Tables
Literary Form
non fiction
Physical Description
1 online resource (35 pages)
Specific Material Designation
Form Of Item

Library Locations

  • EP Library Brussels

    60 rue Wiertz, Brussels, B-1047, BE
  • EP Library Luxembourg

    Rue du Fort Thüngen, Luxembourg, L-1313, LU
  • EP Library Strasbourg

    7 Place Adrien Zeller, Allée du Printemps, Strasbourg, F-67070, FR