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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 Blanchflower of Dartmouth College and Andrew Levin of the
IMF find similar results in a paper published in March. When the PTER rate is high,
workers may feel unable to ask for higher wages, since what they really want is more
hours. Nervousness about asking for more pay may ripple through the labour market,
says Daniel Aaronson of the Chicago Fed.
Now, in Britain, the PTER rate has also increased steeply since the crisis. In 2007 9% of
the British workforce wanted a full-time job, but had to stick with a part-time one. By 2013
the rate had risen to 18% of the workforce. At the same time as this was happening,
British real wages were doing poorly. Growth was negative in 2008-14, ending up about
15% lower than it would have been in the trend growth rate in real wages had kept up
during the crisis (see first chart).
From what I can see, though, no one has tried to estimate the impact of the British PTER
on wages. Here is one attempt. What would have happened if the PTER rate had not
increased during the crisis? Let's assume that the effect on wages is the same as it is in America
(ie, a 1% increase results in a 0.4% fall in real wage growth). This assumption is almost certainly
not accurate, but it's not bad. Then, we can estimate the effect: British wage growth up to 2014
would not look anywhere near as bad (see second chart).
All this may explain why, in 2015, wage growth has started to pick up a little bit, despite
little evidence of productivity improvements. So far this year the PTER rate has fallen by
about 1 percentage point and it is still tumbling. If wage growth is to continue, employers
will need to bite the bullet and take on more people full-time.