Recent Trends in Wage Growth

Abstract

Wage growth has risen since the beginning of the new millennium in response to an increasingly tight labour market. So far, however, most measures have shown relatively muted nominal growth in wages given that unemployment is at historic lows and reported staff shortages are at historic highs. Wages are vital to the performance of the labour market because they are an important incentive to attract people into industries and occupations where workers are in short supply, and make up a large proportion of income for people and of expenditure for firms. This paper examines recent wage trends in New Zealand to show that wage growth has been broadly appropriate in the current economic expansion. One of the key difficulties of looking at wage growth is the preponderance of different measures. This paper starts by outlining the various measures of wage growth and then these measures are used to analyse the link between wage growth and labour market conditions.