Comparative analysis of wages in central and eastern EuropeRajko Kosanović, Sanja Paunović and Bruno S. Sergi

This article reviews the recent performance of south-east European, and eastern European, economies on the issue of wages, inequality and the role of the minimum wage. Rises in inequality are often associated with market liberalisation in transition economies, stemming from unemployment and a reversal of communist societies’ heavy investment in the stock of human capital, although it is also true to say that some economies have managed at least to see the position deteriorate no further as a result of economic growth and effective fiscal redistribution measures. Real wage developments are important for domestic purchasing power and for welfare, but also for economic growth. Real wages have lagged behind productivity in south-east European countries in the entire period since 2008, although minimum wages have seen a process of catching up since 2012 and a small process of income redistribution. The result, otherwise, is clear in terms of the impact both on workers as well as on aggregate demand of a disconnect between economic growth and wage growth, which will be to the long-term detriment of societies in the region.