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Wage formation affects unemployment in the long and short run. The wage is the “price” paid by the employer for its labour force and it is of great importance for what amount of labour that the employers ask for. How wage formation works is also of importance for to what extent shocks to the economy have long-run effects on unemployment.

Institutional changes, for example, in the design of labour market policy, have effects on wage formation. Knowledge about these connections is decisive for understanding long-term unemployment, the impact of business cycle changes on the labour market and different incomes and employment of different groups.

Wage distribution

We also study wage distribution, i.e. the differences between those with the highest and the lowest wage. Knowledge about what the wage differences look like and by what they are affected is of importance. The wage distribution leads to individuals being able to consume to different extents, but it also affects the labour market by controlling the incentives for further education as well as geographical and professional mobility.

The research also deals with how the Swedish wage-setting institutions work and how this has changed over time. Central questions concern the development of explanatory factors behind the wage distribution and how the wages for different groups of employees are affected when there are changes in the firms’ conditions and the situation on the local labour markets.

 

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