Wage and economic developments in Europe: A look back and ... · Wage and economic developments in Europe: A look back and forward Andrew Watt industriAll European Summer School Rome,

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Wage and economic developments

in Europe: A look back and forward

Andrew Watt

industriAll European Summer School

Rome, 17.09.2014

2

Macroeconomic environment for wage-setting

in Europe

Wage levels and recent developments

Competitive adjustment in the euro area

Wage-setting issues and strategies

Overview

3

GDP – triple dip?

4

Growth – (mostly) running

on empty

5

Unemployment – high levels

but huge divergence

6

Unemployment back down

in 8 years - maybe

7

Employment

8

Persistent decline in

nominal wage growth

9

Persistent disinflation and

widespread deflation

10

Huge wage disparities and

important sectoral gaps

Labour costs per hour

worked in manufacturing

in 2012

Labour costs per hour

worked the private

service sector in 2012

Deviation of labour costs in

the private service sector

relative to the manufacturing

sector in 2012

11

Nominal wages

-8

-6

-4

-2

0

2

4

6

8

EL

CY

CZ IE SI

MT

ES

SK

EU

-28

SE

DK IT

EA

-18

FR

HR

DE

BE

UK

AT FI

NL

PL

LU

PT

HU

LT

LV

RO

BG

EE

2013 2014f

12

Real wages

-8

-6

-4

-2

0

2

4

6

8

CY

EL IE CZ SI

ES

SK

MT

UK

AT

HR IT NL

DK

EU

-28

DE

EA

-18 FI

SE

BE

FR

RO

LU

PL

HU

PT

LT

EE

LV

BG

2013 2014f

13

One-sided convergence of

nominal unit labour costs

90

100

110

120

130

140

150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

BE

DE

IE

EL

ES

FR

IT

NL

AT

PT

FI

WAGE

14

One-sided convergence of

current accounts

15

Pricing to market strategies

– ULC affects margins

a) In the period 2000 – 2008 b) In the period 2008 - 2012

export prices unit labour costs

16

Maintaining an orientation towards medium-run

productivity plus target inflation given sluggish

productivity growth and low and falling inflation?

How to ensure more symmetrical rebalancing of

competitiveness

Greater investment in European wage coordination in

industrial sector?

Campaign for higher public and private investment?

Wage policy challenges