Nominal Wage Rigidity in the United Kingdom

This paper studies the degree of downward rigidity in nominal wages in the United Kingdom using micro-data. Around 9% of employees who remain in the same job from one year to the next have zero pay growth. But on investigating the causes of rigidity we ®nd that up to ninetenths can be attributed to `symmetric' causes (such as contracts and menu costs) or to error. Thus only 1% of workers have pay that may be downwardly rigid. This suggests asymmetric, downward rigidity is not large enough to have serious macroeconomic consequences. The labour market provides almost no evidence to support a positive in ̄ation target.