during this cycle? these factors can help to explain why employment is more variable for the low paid. it ’ s possible the same factors have been at work in the most recent cycle in the uk. but the last the regression also includes time dummies so allows for arbitrary variation of pay growth net of the compositional effects. in principle, demand - side factors could still matter. perhaps, for example, the problems of the financial industry, whose employees are better qualified than average, have pushed employment towards other industries. to that extent, the regression could be picking up effects whose origins are demand - led – a shift in output across sectors – but attributing them to changes in individuals ’ characteristics. but this seems unlikely : in truth, shifts in sectoral employment haven ’ t been big enough to generate such effects. even if you exclude individual characteristics from our regression – the shifts in qualifications and occupations that do most of the empirical work – variations in sectoral employment shares don ’ t do a good statistical job of explaining wage growth. bis central bankers ’ speeches few years do look distinct, at least compared with the early 1990s cycle – overall, the compositional effects have been adding less to wage growth. they were less positive during the downturn, but have been more marked, in a negative direction, during the recovery. overall, the “ quality ” of the workforce looks to have been growing at a somewhat slower rate since the onset of the 2008 recession – worth around ½ % point a year on average wage growth – than it did during the equivalent period in the 1990s. why might this have occurred? i can think of two possibilities, though there are no doubt others as well. one is that the financial crisis has depressed the relative demand for highskilled employees. i mentioned earlier that economists believe high - skilled jobs are probably complements, rather than substitutes, for capital and new computer technology. this is the most common explanation for the marked rise in the “ skill premium ”, in the us and elsewhere, during the 1980s and 1990s : new technologies favoured skilled jobs and their wages rose faster than those of the unskilled8. so if the incentives to invest in new physical capital have been depressed since the great recession, by things like higher rise premia or problems in the banking system, perhaps the same applies to investment in human capital. it ’ s also possible the relative supply of low - skilled labour has risen. we know, for example, that migration flows have risen significantly

economics and statistics nickell, s., 1979. “ education and lifetime patterns of unemployment, ” journal of political economy, university of chicago press, vol. 87 ( 5 ), pages s117 – 31, october. phillips a. w., 1958, “ the relation between unemployment and the rate of change of money wage rates in the united kingdom, 1861 – 1957 ”, economica. pissarides, c., 2000, “ equilibrium unemployment theory ”, massachusetts institute of technology, 2nd edition slacalek, j., 2005, “ productivity and the natural rate of unemployment ”, department of macro analysis and forecasting, diw berlin solon, g, r. barsky, and j. parker, 1995, “ measuring the cyclicality of real wages : how important is composition bias? ” q. j. e. 109 ( 1994 ), pp. 3 – 25. staiger, d., j. h. stock and m. w. watson, 2001, “ prices, wages and the u. s. nairu in the 1990s ”, nber working paper no. 8320. bis central bankers ’ speeches chart 1 : large flows into and out of chart 2 : growth of average wages weak in employment 2013, 2014 despite low unemployment source : labour force survey and own calculations source : ons, bank of england, niesr and hills, thomas, dimsdale note : aei until 2010 and awe since ; inflation expectations as implied by indexed gilt market ; 2014 diamond is for h1. chart 3 : compositional effects currently chart 4 : low skilled employment more weak, generally counter - cyclical cyclical in the us source : ons, labour force survey and own calculations source : u. s. bureau of labour statistics bis central bankers ’ speeches chart 5 : productivity growth very weak chart 6 : pay surveys better match for awe in recent years ex compositional effects source : ons, cbi and bcc source : ons table 1 : detailed questions in the labour force survey characteristics lfs question age how old are you? occupation what was your ( main ) job in the week ending sunday the [ date ]? tenure in which year did you start working continuously for your current employer? and which month was that? education this next section is about qualifications gained in the uk. please think about all qualifications you have ever gained [ in the uk ], even if it was a long time ago or you are