The long-run determinants of UK wages, 1860-2004

As it is almost 50 years since the Phillips curve, we analyze an historical series on UK wages and their determinants [see Phillips, A.W.H., 1958. The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861 1957. Economica, 25, 283 299]. Huge changes have occurred over this long-run, so congruence is hard to establish: real wages have risen more than 6 fold, and nominal 500 times; laws, technology, wealth distribution, and social structure are unrecognizably different from 1860. We investigate: wage rates and weekly earnings; real versus nominal wages; breaks over 1960 2004; non-linearities, including Phillips' non-linear response to unemployment; 'trade union power' and unemployment benefits; and measures of excess demand, where workers react more to inflation when it rises. (C) 2007 Elsevier Inc. All rights reserved.