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WAGES FAIL TO RECOVER

Explore the impact of wage dynamics on the economy, with insights on preventing deflation, reducing inequalities, and fostering upward wage convergence. Highlighting the importance of wage increases in driving demand, maintaining price stability, and tackling income disparities for a fairer economic landscape.

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WAGES FAIL TO RECOVER

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  1. PAY RISES : A PLUS FOR THE ECONOMYPresentation to ETUC Pay Campaign conference February 2017Ronald Janssen, TUAC

  2. WAGES FAIL TO RECOVER

  3. WAGES TOUCHING ROCK BOTTOM

  4. UK: PAY STUMBLING ALONG

  5. CEE: CONVERGENCE TOWARDS THE BOTTOM

  6. WAGE DYNAMICS MODEST EVEN IN GERMANY

  7. WAGE STAGNATION IS BAD FOR THE ECONOMY • HOLDING BACK THE RECOVERY • FEEDING FORCES OF DEFLATION • INCREASING INEQUALITIES • PREVENTING UPWARD CONVERGENCE OF WAGES IN CEE

  8. (1) WAGES STRENGHTEN DEMAND AND ACTIVITY • PERSPECTIVE OF INDIVIDUAL FIRM: WAGES ARE JUST A COST • MACRO PERSPECTIVE: SQUEEZING WAGES UNDERMINES DEMAND FOR GOODS AND SERVICES • “MY WAGE = MY SPENDING = YOUR JOB”

  9. AN IMF SIMULATION

  10. ECB ACTUALLY COUNTING ON WAGE REVIVAL

  11. (2) WAGES AS AN ANCHOR OF PRICE STABILITY • A KEY OBJECTIVE OF CENTRAL BANKS: KEEP INFLATION UP (at least 2 5%) TO KEEP ECONOMY AWAY FROM DEFLATION • ZERO WAGE COSTS = NO PRESSURE ON BUSINESS TO RAISE PRICES

  12. UNIT WAGE COSTS FAR BELOW 2%

  13. ECB MISSING INFLATION TARGET

  14. BEHIND THE EURO AVERAGE

  15. IMF WAGE MODERATION SCENARIO

  16. (3) WAGES AND INEQUALITY

  17. LABOUR SHARE IN DECLINE

  18. WAGES AT THE TOP PULLING AWAY

  19. (4) PREVENTING CATCH UP OF CEE

  20. … DESPITE MUCH SMALLER GAPS IN PRODUCTIVITY • WAGE IN CZ 33% OF WAGE IN DE….WHILE PRODUCTIVITY IN CZ IS 67% OF DE • WAGE IN RO 9% OF DE WAGE….WHILE PRODUCTIVITY IN RO IS 44% OF DE • THESE STATISTICS BIASED DOWNWARDS IN FDI RECEIVING COUNTRIES(see ETUI WP 2016/08)

  21. LOW WAGE STRATEGY NOT SUSTAINABLE • OTHER PARTS OF THE WORLD OPEN UP AND DEVELOP AND BECOME NEW COMPETITORS • TO KEEP AHEAD, CEE NEED TO UPGRADE INTO MORE SOPHISTICATED PARTS OF VALUE CHAINS • HIGHER WAGES PROVIDE INCENTIVE TO DO SO…ALSO RETAINING SKILLS

  22. EUROPEAN WORKERS NEED A PAY RISE • TO SUPPORT RECOVERY • TO GET BACK TO PRICE STABILITY • TO PROMOTE FAIR DISTRIBUTION OF ECONOMIC PROGRESS • WHAT IS TO BE DONE ?

  23. TACKLING LOW PAY WORKERS EARNING LESS 60% MEDIAN W

  24. Wage inequality (D5/D1) and minimum wages 2014

  25. NATIONAL MINIMUM WAGES

  26. COLLECTIVE BARGAINING • RESPECT • RESTORE • PROMOTE

  27. COLLECTIVE BARGAINING COVERAGE AND EXTENSION

  28. EXTENSION AND EMPLOYER DENSITY

  29. BARGAINING COVERAGE AND INEQUALITY

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