As Krueger (2018) discusses, there are other types of “implicit contract” which might dilute workers’ bargaining power. See also Manning (2003). 25 Autor et al (2017b). 26 Autor et al (2017b). 27 Autor et al (2017b). 28 Benmelech, Bergman and Kim (2018). 29 Mueller, Ouimet and Simintzi (2017). 30 Abel, Tenreyro and Thwaites (forthcoming). 24  12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Implications for Monetary Policy  Let me conclude with some reflections on current and prospective pay developments. A year ago, prospects for pay were cloudy. Average weekly earnings growth – excluding the volatile bonus component – was running at a 2% annual rate, in line with its growth over the preceding three years. Average pay settlements were running at just over 2%. Signs of a pay pick-up had, to that point, proved to be false dawns. A year on, I think there is more compelling evidence of a new dawn breaking for pay growth, albeit with the light filtering through only slowly. Average weekly earnings growth (excluding bonuses) has risen to 2.9% – a clear rise and a little stronger than the MPC had expected at the time of its Inflation Report in August. Pay settlements have risen to 2.8% in a similar pattern (Chart 23). Measures of labour market tightness have increased to their highest levels since before the crisis and, in some cases, ever. Looking beneath the headline figures, evidence of an up-tick in pay is clearer still.
The dependent variable for these models is the four-quarter growth rate of whole economy total average weekly earnings. As such, the residuals from these regressions will be serially correlated, and so we report Newey-West standard errors. Specification 6 is run on annual data back to 1892; the dependent variable is annual nominal wage growth. Trend productivity growth is calculated as a five-year trailing average. 31  All speeches are available online at www.bankofengland.co.uk/speeches  31