Title: Wa ge flexibility in Britain
Description: "This paper uses the British New Earnings Survey (NES) to derive both macro and micro measures of wage rigidities. The data set spans the 1975-2000 period, with wage observations covering approximately 1% of the British workforce. Using this data set, we consider whether wages have  become more flexible in recent years. Evidence drawn from macroeconomic wage equation  estimates suggests that, while the relationship between wages and unemployment seems to have  changed, the responsiveness of wages to unemployment rates has declined in the 1990s. In contrast  to previous findings, these results suggest that wages have become less flexible. Micro tests mainly  reveal that the prevalence of nominal rigidities has not declined, although there is weak evidence for  a decline in the most recent years. Micro tests of wage rigidities also include an analysis of real  wage rigidities. There is evidence in the NES of spikes in the wage-change distribution at the rate of  inflation, beyond what would be anticipated from the rest of the distribution, suggesting the presence  of real wage rigidities. This evidence is shown to be statistically significant, and points to an  increase in real rigidities over the period of study."--Bank of England web site.