The Worldwide Wage Explosion

William D. Nordhaus

WDN

William D. Nordhaus

DURING THE DECADE PRIOR TO 1968, most of the industrial countries of
the West experienced a period of tranquility in which prices were relatively
stable and wage inflation moderate. Then quite suddenly-and, to judge
from professional and political reaction, unexpectedly-wages and prices
began to rise very sharply. Figure1 shows the pattern of inflation for manufacturing
wages from 1956 to 1971; the break in the trend in 1968 and the
ascent to the peak in 1970 are clearly discernible. The wage histories of the
seven countries to be considered in this paper are shown in Table 1. In
each, wage inflation during the last four or five years rose noticeably over
earlier years in the sixties.