The real wage gap and its development over time: the Irish experience 1960-87: a comment

Abstract

I wish to make a number of points regarding the content of the paper on the wage gap presented by Walsh, Walsh and Woelger. Let me first of all state that I found the explanation given in the paper to be a very simple and a very lucid outline of a concept which may not be familiar to all of the participants at this Conference. The wage gap is basically the difference between the share of wages attributable to labour now, W, and at some full employment equilibrium, W*. Now according to the paper, if I read it correctly, there are three reasons why a wage gap may arise. The first reason is that "too high" wages may be achieved by labour at present. The second reason is that external shocks i.e., terms of trade shocks, may lead to a wage gap developing through relative price effects. The third reason is the potential for a low growth trap to occur as a result of a previously existing real wage gap.