Determinants of Wage Share and Real Unit Labour Costs

In the long term, it is high and increasing unemployment which constitutes the key determinant for a decline in the adjusted wage share and the real unit labour costs. Economic growth plays a similarly important role. Higher investment will increase the profit share. Countries whose economy and productivity grew fastest (Ireland, Finland, Sweden) saw their real unit labour costs plunge deepest. The inflation rate affects the wage share in the short term because employees will attempt to compensate for unexpected price increases by demanding higher wages.