Centre for Vocational Education Research LSE RSS Email Facebook Twitter


CentrePiece article
Wage growth and productivity growth: the myth and reality of 'decoupling'
Joao Paulo Pessoa and John Van Reenen
December 2013
Paper No' CEPCP401:
Full Paper (pdf)

CentrePiece 18 (2) Autumn 2013

JEL Classification: E24; J20; J30

Tags: decoupling; wages; productivity; compensation; labour income share

Employees in the UK are not being denied their fair share of economic growth, according to research by João Paulo Pessoa and John Van Reenen. Their investigation of claims that wage growth has become ‘decoupled’ from productivity growth finds that decoupling has been overstated and cannot be used to justify redressing the balance between wages and profits. They show that the share of UK income going to labour is basically the same now as it was 40 years ago. The real problem is inequality among employees: wage inequality has risen massively since the late 1970s. Improving skills in the bottom half of the education distribution will boost productivity and real wages.

This article summarises ‘Decoupling of Wage Growth and Productivity Growth? Myth and Reality’ by João Paulo Pessoa and John Van Reenen, CEP Discussion Paper No. 1246.