Growth up, wages down: something has to give

In Growth up, wages down we consider the relationship between growth, consumption, investment, incomes and earnings in order to ascertain just how far wage growth might need to rise in order to set the economy back on track.

For the purposes of illustration we consider the magnitude of wage growth that might be required to return GDP growth to its historic trend through to 2018. Our findings suggest that average earnings would need to rise by more than 2 per cent a year in real terms from 2015. This is lower than the growth achieved during the late 1990s (2.8 per cent a year), but higher than that experienced during the early-to-mid 2000s 1.7 per cent a year).