Instead, using samples of individual workers, [Blanchflower and Oswald 1995 and 1996] documents the existence of a logarithmic curve – what physicists would call a power law – linking the level of the wage to the unemployment rate in the local area. Their bookâ€™s conclusion is that, in sixteen nations, including the United States, the data are well described by a wage curve with an unemployment elasticity of approximately â€“0.1.
That is, if an area X has double the unemployment of another area Y it would have (approximately) 10% lower wages. The elasticity figure may be a slight overestimate due to the self-censoring involved in publication (no effect results don’t get published). As the authors note, no good theoretical reason for the existence of this empirical regularity has yet been provided.