Wage inflation and labour unions in EMU
2009; Routledge; Volume: 16; Issue: 4 Linguagem: Inglês
10.1080/13501760902872742
ISSN1466-4429
Autores Tópico(s)European Union Policy and Governance
ResumoAbstract This paper examines different levels of wage moderation in EMU member states since the introduction of the euro. Most arguments examining wage restraint have done so relying on the assumptions that relations between EMU member states are symmetric and that wage-setting systems are similar across sectors within one country. We introduce one innovation to these approaches and develop a second existing one. The paper adopts a dual-sector approach, where exposed sector unions are still tied to a competitiveness constraint on wages, while sheltered sector unions neither face a hard monetary constraint imposed by the central bank nor are subject to a competitive one. Wage moderation is higher in countries with wage-bargaining institutions which tie wage-setters in the sheltered sector to the exposed sector through a co-ordination mechanism. The second innovation is that of asymmetries between Germany and other EMU member states. Keywords: Central banksdual-sector economyEMUinflationtrade unionswage bargaining ACKNOWLEDGMENTS The authors wish to thank the Anglo-German Foundation and the Hans-Böckler Foundation (Project 2000-203-1) for financial support, and Michael Artis, Dorothee Bohle, Richard Bronk, Anil Duman, Bela Greskovits, Anke Hassel, Costanza Rodriguez- d'Acri, Waltraud Schelkle, David Soskice, three anonymous reviewers, and participants in the PERG seminar at the CEU and a conference at the Hertie School of Governance for helpful discussions. The usual exculpations apply. Notes Our calculation of wage restraint differs from Oliver Blanchard's (2006) Blanchard, O. 2006. European unemployment: the evolution of facts and ideas. Economic Policy, 21(45): 5–59. [Crossref] , [Google Scholar] efficiency wage measurement, only in terms of the nominal weight: Blanchard uses real wage growth minus labour productivity growth while we use nominal wage growth minus labour productivity growth. We use nominal wages rather than real wages to differentiate between productivity-driven and inflation-driven wage restraint. Also, since ours is an actor-centred approach, nominal wage growth is a more optimal dependent variable as, unlike real wage growth, actors have greater influence over it. Aggregate calculations are computed using nominal compensation data from the AMECO database and labour productivity data from the OECD. Sectoral calculations are computed using data from the EU KLEMS database. We divided total compensation by number of hours worked to obtain the nominal wage per hour, and sectoral gross value added was used for labour productivity. We used the Phillips curve as our baseline model for preliminary regression analyses. Time series data spanned from 1991 to 2006 for national level analysis and 1991 to 2005 for sector level analysis. We thank Michael Artis for this point. Since our approach requires us to compare countries with some degree of co-ordinated labour markets, we do not include the UK, the only EU15 country whose labour market lacks any wage co-ordination. We have included Sweden and Denmark, but were unable to include Norway or Switzerland as non-EMU control cases owing to the absence of data in the EU KLEMS database for these countries. This continuing central role of Germany in EMU has primarily historical reasons. Since the country was the anchor of the ERM until EMU with one of the lowest inflation rates, it remained in that position after the introduction of the euro. It would not have mattered who the actual anchor was at the time (although the large trade volumes with Germany would make it more of an anchor than others); however, once EMU came into existence, the country in the anchor position remained there as a result of the institutional design. Data on wage restraint by sector for the EMU10 (Luxembourg and Greece excluded) are available upon request.
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