Policy must look beyond pay to raise living standards

Significance

Elections have already given the public an opportunity to vent their anger about low wages and the scarcity of better job opportunities -- the former is prevalent among low-paid workers; the latter anxiety is wider. But concern is rising about a disconnect between jobs and pay.

Impacts

• Pre-crisis nominal pay rises were in the 2-5% range in the advanced economies -- fuelling expectations of a pick-up in pay.
• US consumers could moderate their nominal wage demands, as lower inflation has eased the pressure on real wages.
• Competition and technological progress will continue to reduce the price of many manufactured goods and some services, helping households.