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Unemployment, Wages and Collective Bargaining in the European Union

  • Hein, Eckhard
  • Schulten, Thorsten

The paper questions the predominant view on unemployment and wages in the European Union according to which high unemployment is primarily caused by labour market rigidities, i.e. social institutions and regulations which prevent ?market-clearing? real wage levels and structures. It is shown that the foundations of that view coming either from neo-classical or new-Keynesian theory are not convincing, neither theoretically nor empirically. Analysing the developments in the EU during the last four decades, no strictly inverse relationship between real wage growth and unemployment can be found. On the contrary, persistently high unemployment has had strong adverse effects on nominal wage growth and on the labour income share. Weakened labour union bargaining power and changing collective bargaining strategies have contributed to this result. It is therefore concluded that the current EU economic and employment policies aiming at further wage restraint, wage differentiation and decentralisation of collective bargaining are deeply misguided and have to be replaced by an alternative wage policy in Europe as part of a growth and employment oriented coordination of macroeconomic policies.

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File URL: https://www.econstor.eu/bitstream/10419/21570/1/p_wsi_diskp_128.pdf
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Paper provided by The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation in its series WSI Working Papers with number 128.

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Date of creation: 2004
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Handle: RePEc:zbw:wsidps:128
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  1. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
  2. Blanchard, O & Katz, L, 1996. "What We Know and Do Not Know about the Natural Rate of Unemployment," Working papers 96-29, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 7-33, March.
  4. Eckhard Hein & Thorsten Schulten & Achim Truger, 2004. "Wage trends and deflation risks in Germany and Europe," Macroeconomics 0412008, EconWPA.
  5. Eckhard Hein & Achim Truger, 2004. "Macroeconomic co-ordination as an economic policy concept - opportunities and obstacles in the EMU," Macroeconomics 0408011, EconWPA.
  6. Hein, Eckhard, 2003. "Die NAIRU: Eine post-keynesianische Interpretation," WSI Working Papers 113, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
  7. Hein, Eckhard, 2002. "Monetary policy and wage bargaining in the EMU: Restrictive ECB policies, high unemployment, nominal wage restraint and rising inflation," WSI Working Papers 103, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
  8. Schulten, Thorsten, 2004. "Foundations and Perspectives of Trade Union Wage Policy in Europe," WSI Working Papers 129, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
  9. David Soskice & Torben Iversen, 2001. "Multiple Wage Bargaining Systems in the Single European Currency Area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(4), pages 435-456, December.
  10. Hein, Eckhard & Truger, Achim, 2004. "What ever happened to Germany? Is the decline of the former European key currency country caused by structural sclerosis or macroeconomic mismanagement?," Darmstadt Discussion Papers in Economics 134, Darmstadt University of Technology, Department of Law and Economics.
  11. Andrew Glyn, 2003. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," Economics Series Working Papers 168, University of Oxford, Department of Economics.
  12. Boeri, Tito & Brugiavini, Agar & Calmfors, Lars (ed.), 2001. "The Role of Unions in the Twenty-first Century: A Report for the Fondazione Rodolfo Debenedetti," OUP Catalogue, Oxford University Press, number 9780199246588, December.
  13. Christopher Allsopp, 2002. "The Future of Macroeconomic Policy in the European Union," Discussion Papers 07, Monetary Policy Committee Unit, Bank of England.
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