Another possibility is that there might be significant non-linearities in the Phillips curve. Perhaps strong wage-price dynamics are absent when uncertainty is high. Or perhaps wage earners have learned over the past decade not to pay too much attention to inflation when forming their expectations – though they may now increasingly do so.
The growing risk of recession in the euro area and the steadily increasing labour participation rate might also be factors that have kept wages in check. Whatever the correct explanation for the slow reaction in wages so far, improving our understanding of wage-setting in the current environment should be high on the research agenda.