earnings drift

earnings drift

the propensity for earnings, primarily WAGES and SALARIES, to increase at a rate faster than agreed rates per unit of LABOUR. Many factors contribute towards an earnings drift, such as OVERTIME, bonuses, special agreements, restructuring of PIECEWORK agreements, and so forth. Areas where a particular skill is in demand will pay higher rates than areas where shortages do not exist. The ability to negotiate such terms and conditions, sometimes informally between employer and employee, leads to a significant weakening in the case for an incomes policy as a tool of economic management because of the ease with which it can be circumvented. Earnings drift tends to be associated with conditions of full employment where employers are more readily prepared to concede wage increases to retain their labour force. See INFLATION, PRICES AND INCOMES POLICY.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005