wage moderation
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2022 ◽  
pp. 1-32
Author(s):  
Mathias Klein ◽  
Stefan Schiman

Abstract This study examines the driving forces behind the strong decline in German unemployment from 2005 onwards and the exceptionally small increase during the Great Recession. Structural vector autoregressions (VARs) with sign restrictions show that wage moderation in the aftermath of labor market reforms was the dominant factor of the unemployment decline, and that improved matching and shrinking labor supply also contributed to it. The adjustment to business cycle shocks (Great Recession), on the other hand, is to a large extent borne by the intensive margin, which can be explained by institutional aspects of the German labor market.


Author(s):  
Gerhard Bosch

This chapter begins with a summary, based on a number of key indicators, of the evolution of industrial relations in Europe. The fundamental importance for the primary distribution of income of minimum wages and collective agreements is explained. The example of the interactions between minimum and collectively agreed wages is used to develop a typology of the various wage-setting ‘architectures’ in the EU. In a monetary union the debate on the appropriate wage policy cannot be conducted on a country by country basis. Wage moderation or expansive wage increases can have both positive and negative effects on other countries. Finally, the interventions by nation states and the Troika in collective bargaining systems will be investigated.


Author(s):  
Alison Johnston

Wages and wage bargaining institutions are foundational components of comparative capitalism research. Supply-side comparative capitalism research has often assumed that wage moderation—facilitated through highly coordinated wage-setting institutions—produces beneficial growth outcomes. This supposition stems from the logic that restrained unit labor cost growth causes firms to increase employment and output. However, through its demand-side perspective, new growth model literature questions the virtues of wage moderation, because the restraint of wages can be detrimental to growth via its suppression of domestic consumption. This chapter empirically tests under what conditions will wage moderation produce economic growth. Using a first-difference, distributive lag panel analysis of eighteen OECD countries from 1970 to 2015, its findings largely resonate with predictions within the growth model literature. In the presence of wage restraint, countries with larger export shares and highly coordinated wage-setting institutions realize higher growth and lower unemployment than countries with smaller export shares and uncoordinated wage-setting institutions. In contrast, wage inflation produces better growth outcomes for countries with uncoordinated wage-setting, relative to those with highly coordinated wage-setting institutions. These results suggest that wage restraint is not a winning strategy for all growth models. Rather, wage moderation is associated with better growth (and unemployment) outcomes only for countries with export-led growth strategies.


2020 ◽  
pp. 095968012097075
Author(s):  
Anna Milena Galazka ◽  
Thomas Prosser

This article addresses how far wage imbalances in the Eurozone can be imputable to intentional agency by collective bargaining organizations. Using Archer’s morphogenetic approach, we explain the agentic role of social partners in core (Germany) and periphery (Spain) cases, in relation with the respective collective bargaining regimes. We show that the capacity of macro- and meso-level organizations to effect wage-setting practices can be constrained inadvertently by contextual influences with morphostatic properties, generating constrained modes of corporate agency. Yet wage moderation is best understood as a form of agency itself, functioning ‘by being’ rather than ‘doing’, which over time can become more innovative. We contrast this finding with the less constrained capacity of more institutionalized corporate agents, such as transnational business corporations and central state agencies.


2020 ◽  
Vol 21 (2) ◽  
pp. 139-179
Author(s):  
Michael C. Burda ◽  
Stefanie Seele

AbstractFrom 2003 to 2018, employment in Germany increased by 7.3 million, or by 19.3 % – growth not observed since unification. This “labor market miracle” was marked by a persistent and significant expansion of both part-time and low-wage jobs and a deterioration in pay for these jobs, while total hours hardly increased; overall wage growth returned only after 2011. These developments followed in the wake of the landmark Hartz reforms (2003–2005). A modified framework of Katz and Murphy (1992) predicts negative correlation of wages with both relative employment and participation across cells in the period following these reforms. In contrast, wage moderation alone should generate positive association of wages and participation. Our findings are most consistent with a persistent, positive labor supply shock at given working-age population in a cleared labor market. An alternative perspective of labor markets, the search and matching model, also points to the Hartz IV reforms as the central driver of the German labor market miracle.


Author(s):  
Philip Manow

The adjustment pattern of the German model to low growth and to the transition to the service economy proved unsustainable in the medium to long term, and ultimately led to a profound welfare state reform that in many respects broke with the quasi-corporatism of Modell Deutschland. This has been associated with the spectacular revival of the German economy, before and after the Great Recession, also because its competitive characteristics were significantly strengthened within the euro area. Yet, the success of Modell Deutschland of course also contributes to the increasing imbalances and to the divergent economic dynamics within the common currency area, which ultimately have the potential to disrupt it. The chapter explains in more detail how wage moderation remained stable in Germany even though the strategic interaction with the German Bundesbank, on which the wage-moderation arrangement for a long time had been based, was a thing of the past after the introduction of the euro. It points to functional equivalents for the disciplining effect of Germany’s accommodating social policy.


2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Ansgar Belke ◽  
Daniel Gros

AbstractThere is a symmetrical debate in two Euro area core countries: in France about the restrictive fiscal policy of Germany, leading to a huge external surplus, in Germany about the insufficient compliance with fiscal rules and the lack of structural reforms in France. What are the real causes of the divergence between the two economies? We show that different indicators of competitiveness yield very different results depending on the base period used, e.g. 1995 (peak of reunification boom), 1999 or 1990. A comparison with the pre-unification period shows little gain in competitiveness. We also find, somewhat surprisingly, that Germany’s industry is not more integrated in international value chains than that of France or Italy. We then look at the link between export growth and export prices and argue that in the long run exports are not driven by competitiveness but by the increased supply of labor resulting from unification. In addition, we ask what drove ‘wage moderation’ in Germany: policy or the labor market. We finally analyse the longer-term trend in fiscal policy and the resulting distributional consequences in both countries. Our more general policy implication is that any analysis which compares today to the trough of German performance after unification risks over-estimating the potential of the country. Given that the ‘internal unification’ process is complete now, one should not expect the Germans to continue to outperform France as it has done over the last two decades.


Author(s):  
Wiemer Salverda ◽  
Stefan Thewissen

This chapter sets out how inequality and real incomes across the distribution evolved in the Netherlands from the late 1970s through the economic Crisis. Inequality grew, though not dramatically, while wages showed remarkably little real increase. This meant that real income increases for households relied for the most part on the growth in female labour-force participation and in dual-income couples. The chapter highlights the major changes in population and household structures that underpinned the observed changes in household incomes at different points in the distribution. It also sets out key features of the institutional structures in the labour market and broader welfare state, and the centrality of the priority given to wage moderation and the maintenance of competitiveness in the growth model adopted throughout the period.


2018 ◽  
Vol 51 (2-3) ◽  
pp. 617-653
Author(s):  
TIMO BETTENDORF ◽  
MIGUEL A. LEÓN‐LEDESMA
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