5  There are various measures of under-employment, including the proportion of the workforce working part-time involuntarily and the gap between actual and desired hours worked. In practice, these two measures exhibit a very similar pattern (Chart 9). They also track the unemployment rate closely. This suggests the incremental information contained in measures of under-employment, relative to measures of unemployment, might be relatively modest. Econometric estimates confirm that impression. Replacing the unemployment gap with a measure of the 6  under-employment gap produces a very similar wage equation (Table 1). And in a pairwise comparison, under-employment is statistically insignificant if the unemployment gap is included. Under-employment is important for pay, but does not appear to much improve the explanation of recent wage dynamics. A third factor determining pay pressures is productivity. It is through gains in productivity that individual firms, and the economy at large, can finance increases in workers’ pay. Econometric estimates confirm that intuition. The productivity of the labour force is a (statistically and economically) significant determinant of pay (Table 1). On average across firms, a 1 percentage point rise in productivity raises aggregate wage growth by around 0.8 percentage points. 4 5 6  Espinosa-Vega and Russell (1997) provide a history and review of the NAIRU concept. For example, Bell & Blanchflower (2018). Specifically, the involuntary part-time share of employment.
This is consistent with superstar firms gaining a greater degree of 25  monopolistic power over customers. There is also evidence linking superstar firms to rising degrees of  concentration in the labour market, consistent with a greater degree of monopsonistic power over workers. 26  These shifts in industry concentration appear to have influenced pay growth. Rising concentration across different sectors of the US economy has been found to have had a significantly negative effect on their labour share. 27  Monopsony power among US industries has been found to have had a negative effect on  wage growth in that sector, the more so when unionisation rates are low. 28  And larger firms have also been 29  found to differentiate to a greater degree in the wages they pay their workers. Colleagues at the Bank, Will Abel, Silvana Tenreyro and Greg Thwaites, have recently found similar effects in the UK. 30  Higher industry concentration is associated with lower pay, the more so the less of a sector is  covered by collective bargaining. One important difference from the US is, however, that labour market concentration has not increased anything like as much in the UK as in the US. This, too, might help explain the relative flatness of the UK’s labour share. 23  For example, Autor et al (2017a). Concentration in the labour market is only one means by which an employer might enjoy greater bargaining power over workers.