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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
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