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Aggregate wage developments in Austria since the introduction of the euro

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Real gross wages per worker have experienced a very subdued development since the introduction of the single currency in Austria. Average hourly wages, on the other hand, have evolved more dynamically. Between 1999 and the Great Recession, the wage share decreased continuously, and wage growth was less than suggested by the “Benya rule.” However, having increased significantly in the aftermath of the crisis, the wage share has been fairly constant in recent years. In 2017, the wage share was only slightly lower compared to that in 1999. The institutional specifics of Austrian wage setting are unique for a developed country (neo-corporatist system, almost complete union coverage and highly coordinated wage setting). Despite declining union density, the system has remained virtually unchanged since the early 1980s. Arguably, joining Economic and Monetary Union (EMU) did not lead to pressures to change the wage bargaining process as Austria had already been part of the “hard currency bloc” in Europe before the introduction of the euro. Phillips curve estimations suggest that nominal wage growth in the past twenty years has been mainly determined by labor productivity and past inflation but has reacted only weakly to the cyclical stance of the economy. In addition, we analyze the effects that structural changes in the labor market and the internationalization of the Austrian economy have had on wage developments. We find evidence that the increased openness of the Austrian economy and changes in participation rates have had a dampening effect on wage growth. In contrast, we find no significant effects for changes in the share of part-time and fixed-term contracts, and in the share of foreign workers. The overall cumulative effect of EMU on wage growth in Austria is estimated to be positive.

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  • Gerhard Fenz & Christian Ragacs & Alfred Stiglbauer, 2019. "Aggregate wage developments in Austria since the introduction of the euro," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 19/Q1-Q2, pages 41-56.
    • Handle: RePEc:onb:oenbmp:y:2019:i:19/q1-q2:b:2
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    More about this item

    Keywords

    wage share; collective bargaining; Austria; monetary union;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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