Research Discussion Paper – September 1995
Labour-productivity Growth and Relative Wages: 1978–1994
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This paper uses industry-level data to analyse labour-productivity growth over the past decade and a half. It focuses on the role of the service sector in determining the strength of productivity growth. In particular, it examines the factors that led to falling labour-productivity in the retail and wholesale trade and the personal and other services industries over the second half of the 1980s. In both industries, wage restraint played an important role. In addition, in the retail and wholesale trade industry, measured productivity growth was retarded by the deregulation of store trading hours. At the aggregate level, a number of factors suggest that productivity growth over the second half of the 1990s is going to be considerably faster than that over the second half of the 1980s.
The links between productivity growth, wages and prices are also explored using the industry level data. These data suggest that differential rates of productivity growth across industries are reflected more in relative prices than in relative wages. The wage data also suggest that productivity growth in the finance, property and business services industry suffers from considerable measurement errors.