There has recently been renewed interest in the role of regional factors-most notably relative house prices-in determining national wage movements, and thus contributing to inflationary pressures. Moreover, in some accounts financial factors, interacting with differential supply responses, play a part in the explanation of changes in regional relative house prices. This article reports the results of some related background research which the Bank has undertaken on variations in wage rates and migration between regions. The variability of earnings is of importance since the more flexible are regional wages the smaller the effects on employment and unemployment for a given shift in demand. However, greater migration will also reduce regional variation in both unemployment and wages. Regressions are used to explore regional earnings growth and unemployment rates over the period 1971 to 1987.
Among the main points to emerge are:
- The variation in regional unemployment rates appears to have been much greater than that of regional earnings.
- The growth of earnings within a region was highly correlated with the national growth rates of hourly earnings of those industries which comprised the region's employment structure.
- There did not appear to be a systematic relationship between relative house price increases and the rate of change of regional hourly earnings.