HAVING returned earlier this year from a stint in the Washington office, your correspondent has been struck by one of the big differences between American and British economic discourse. In both countries since the crisis, real wage growth has been pretty measly. There are many reasons for this, which are detailed here and here. One putative reason for low wage growth, argue many American economists, is that the number of American workers who are "part-time for economic reasons" (PTER) is too high. Someone is PTER if they want to work full-time, but can only find a part-time job. Some economists in America are obsessed with the PTER. But in Britain barely anyone mentions it.
So what's the evidence that a high PTER rate can hold down wages? Since 2008 the number of Americans who are PTER has doubled. A Chicago Fed paper finds that a 1% increase in the PTER rate is associated with a 0.4% fall in real wage growth, even after controlling for the effects of other measures of unemployment. The impact is especially strong for worse-off workers. David...Continue reading
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