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Wage Flexibility and Labour Market

In: Unemployment in Europe

Author

Listed:
  • Bernard Compaijen
  • Klaas A. Springer

Abstract

It is a well-documented fact that the OECD-area can be dichotomised as far as employment trends and unemployment figures in the last fifteen years are concerned. On the one hand we have the USA and Japan, both countries with increasing employment and relatively contained unemployment rates. On the other we have the European countries, many of them with a stagnating employment development and mounting unemployment rates, sometimes into two digits. There is lack of consent on the causes of this malfunctioning of the labour market. In principle, two main weaknesses of the labour-market mechanism can be mentioned. Starting from labour-market equilibrium, we can imagine the occurrence of an exogenous shock, disturbing the initial equilibrium position. The adjustment to a new equilibrium may be hindered or retarded by imperfect quantity flexibility and/or imperfect price (i.e. wage) flexibility.

Suggested Citation

  • Bernard Compaijen & Klaas A. Springer, 1989. "Wage Flexibility and Labour Market," Palgrave Macmillan Books, in: Joan Muysken & Chris Neubourg (ed.), Unemployment in Europe, chapter 16, pages 422-438, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-19795-8_24
    DOI: 10.1007/978-1-349-19795-8_24
    as

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