Comparative Analysis on Wage Policies in Eastern Europe and CIS Economies

1. PERC Economists network meeting “Wage policy forum”10-11 May, Chisinau (Moldova) • Comparative analysis on wages • in the SEE/NIS • Bruno S. Sergi • University of Messina

2. Inequality in Eastern Europe and CIS transitional economies. It comes from the past • In Eastern Europe, changes in the distribution of income and wealth associated with the restoration of market economy, privatization of state assets. • The political implications are country specific, as the countries are diverse in terms of size, level of development, historical background, and social and political structure. • After drastic increase in income equality during the market liberalization period, some Eastern Europe nations have improved or maintained the same level of the Gini coefficient since 2000 due to economic growth, effective fiscal redistribution for social service.

3. What has occurred in the past? The drop of real wages during the transition to market economy

5. Structural Unemployment after the Transition Economics • Many eastern Europe nations inherited a relative large human capital stock from the socialist period, due to relative large investment and development in all stages of education. • The increase in inequality resulted from increase of unemployment due to underinvestment in human capital.

6. Labor productivity in Eastern Europe, 1996–2015

7. Working age population growth

8. CurrentTrendinCentralandEasternEurope(Nov2016,IMF) • Economic growth remains solid in much of Central, Eastern.In Russia, the pace of economic contraction has moderated, as the economy appears to have adjusted to lower oil prices and the sanctions shock. Other CIS economies are gradually exiting from recessions on improved external demand.

9. CurrentTrendinCentralandEasternEurope(Nov2016,IMF)

10. Unemployment is reaching pre-crisis lows, wages have been growing at a strong pace for some time, and the current account balances have begun to deteriorate again.

11. WAGES SOURCE: ILO database

12. And today? Let’s kick off our discussion! SEE.

16. Minimum and average wage growth • Minimum wages since 2012 have been rising faster than average wages in most CESEE countries. • The pace of increase has been sharp particularly in Turkey, and some Baltics and SEE-EU countries. • Based on limited available data, about 10-20% of workers earn the minimum wage in CESEE. • Minimum wage hikes could contribute to overall wage growth directly and indirectly through spillovers. About 1⁄4 of average wage growth in CESEE countries over 2012-15 is associated with minimum wage developments. SEE.

18. Gross average monthly wages

19. Wages, 2005 - 2015

20. Wages, 2005 - 2015

21. Losers and winners

22. Wages vs GDP and Productivity • Note: wages in US$ at current Exchange Rates

38. The role of economic growth and productivity There are 4 factors o f production that influence economic growth within a country: • Natural Resources available • Investment in Human Capital • Investment in Capital Goods • Entrepreneurship

39. https://www.conference-board.org/retrievefile.cfm?filename=The-Conference-Board-2015-Productivity-Brief.pdf&type=subsitehttps://www.conference-board.org/retrievefile.cfm?filename=The-Conference-Board-2015-Productivity-Brief.pdf&type=subsite

40. Growth of Labor Productivity, Persons Employed and Real GDP for Major Emerging Economies, 1999-2016

41. Trend growth of Labor productivity (output per person) using HP filter, Major Regions, 1971-2015

42. Growth of Labor Productivity and TFP, Major Regions, 1999-2015

43. Looking forward: • How will important variables change in the region? • GDP structure, growth, and inflation.

44. Albania

45. Bosnia and Herzegovina

46. Bulgaria

47. Hungary

48. Macedonia

49. Moldova

50. Montenegro