Biography: Stephen Machin is Professor of Economics and Director of the Centre for Economic Performance at the London School of Economics. He is a Fellow of the British Academy, has been President of the European Association of Labour Economists, is a Fellow of the Society of Labor Economists and was an independent member of the UK Low Pay Commission from 2007-14. His current research interests feature the study of labour market inequality, social mobility, education and crime, and the interactions between them.

“Real Wage Stagnation and the Brexit Exchange Rate Depreciation”

Rui Costa, Swati Dhingra and Stephen Machin

Abstract: Immediately after the UK’s vote to leave the European Union, the value of sterling plummeted to record its biggest 24 hour depreciation since the collapse of Bretton Woods. This caused an intermediate import cost shock, not offset by an export revenue gain, and aggregate real wage growth stalled. Real wages fell more and stagnated for workers employed in industries, largely in the services sector, that experienced a bigger cost shock.