WAGE TRENDS IN EUROPE ZSSS SEMINAR ON THE MINIMUM WAGE IN SLOVENIA Lubljana, 16th of June

THE CRISIS IS TAKING ITS TOLL ON WAGES

INSIDE EURO AREA, SOME REBALANCING IS GOING ON

AT THE MOMENT, WAGE PURCHASING POWER IS SAVED BY FALLING PETROL PRICES

HOWEVER, THE STRUCTURAL TREND BEHIND HEADLINE NUMBERS IS DEFLATIONARY: ZERO UNIT WAGE COSTS IMPLY ZERO INFLATION

UNIT LABOUR COST 2015 MUCH BELOW 2% INFLATION TARGET IN MAJORITY OF EURO AREA MEMBER STATES

ANOTHER DISMAL STRUCTURAL TREND : REDISTRIBUTION FROM WAGES TO PROFITS

…..AND THIS IS NOT A NECESSARY CORRECTION OF PAST TRENDS !

…. CONTINUED….

INTERNAL DEVALUATION: SO FAR QUITE A « SUCCES » STORY INDEED…..

SAME GOES FOR ‘UNAVOIDABLE’ TRADE OFF : WAGES OR JOBS

HOW TO EXPLAIN THE FAILURE OF INTERNAL DEVALUATION ? Export driven boom difficult to achieve for relatively closed economies or economies that do not have a sufficient industrial basis What work for one of us, can not be a solution for all of us Cutting wages, in the end, leads to disinflation, even deflation, automaticaly increasing the real burden of debt, squeezing domestic demand further and disabling the banking sector (non performing loans). Breakdown of euro area monetary policy transmission channel: No exports without (export) credits Workers pay (higher) taxes, corporate profits don’t. Redistribution from wages to profits increases public deficit. Perverse feedback loop from austerity policy and its targets.

CONCLUSION : WAGES HAVE SEVERAL « MASTERS TO SERVE » THAN « COMPETITIVENESS » ONLY Engine of aggregate demand, thus jobs,growth and investment Price stability Workers’ security of revenue Fair wage, fair distribution Promotes productivity (and innovation) by forcing employers to re- organise the work place in better ways.