European Trade Union Institute, ETUI.

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12 January 2016

ETUI event shows different views on European wage development debate

During a lunch debate on 7 January, the European Commission presented a recent report entitled Labour Market and Wage Developments in Europe 2015. According to this report, the labour market recovery has gained notably in terms of falling unemployment rates across Europe. Despite its recent drop, unemployment remains high and the share of long-term unemployed is on the rise. On wages, the report shows that wage dynamics have slowed down since the crisis and that there is a limit to the adjustment of wage developments when it comes to inflation and internal devaluation.

Guy Van Gyes (HIVA/KUL) and Thorsten Schulten (WSI/HBS) challenged the European Commission’s report with findings from a recent ETUI publication Wage bargaining under the new European Economic Governance.

“There is a conceptual critique that needs to be made of the report, insofar as the crisis is viewed in it mainly as a crisis of competitiveness, with imbalances regarded as merely the result of divergent unit labour cost developments”, said Guy van Gyes. According to the ETUI book’s editors, the analyses carried out by the Commission address mainly the competitiveness aspect, regardless of the structure of the real economy, the non-price factors and the loose relationship between wages and exports.

“Stabilising and enforcing wage developments has the potential to counter deflationary price development, to stabilise and increase private demand, to counter income inequality and to push for inclusive productivity growth”, continued Thorsten Schulten.

Since the crisis there has been a new type of EU interventionism in wage development in the form of European Economic Governance. This new approach has introduced structural reforms into the wage-setting institutions in order to decrease the flexibility of wages. Country bargaining no longer exists and a dramatic decline in collective bargaining coverage has been observed. Even if most European countries have set universal wage floors, the level of the minimum wage is often too low to prevent poverty.

The new ETUI publication proposes an alternative view of wage developments and wage-setting institutions by urging a more inclusive growth strategy characterised by expansive and solidaristic wage development. It also recommends establishing a European Initiative to promote an Extension Mechanism and a European Minimum Wage policy via a coordinated strategy for adequate minimum wages and encompassing collective bargaining.

Further reading:

Labour Market and Wage Developments in Europe 2015.

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