Sluggish wage growth and depressed labor force participation

Sluggish wage growth in the post-recession era can predominantly be attributed to nominal wage rigidity, still-high underemployment, and an elevated share of part-time workers. A factor decomposition of the labor force points to the increasingly structural nature of the decline in the labor force participation rate as babyboomers retire. Adjusting for age demographics, the decline in the participation rate is much less pronounced than appears in the official reading. The further we are from the Great Recession, the more the decline in participation becomes structural. All else equal, this points to increased tightness in labor markets which should lead to upward wage pressure in the near future.