Wage Flexibility and Labour Market

Bernard Compaijen and Klaas A. Springer

Chapter 16 in Unemployment in Europe, 1989, pp 422-438 from Palgrave Macmillan

Abstract: 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.

Keywords: Unemployment Rate; Real Wage; Price Equation; Wage Rigidity; Hourly Earning (search for similar items in EconPapers)
Date: 1989
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DOI: 10.1007/978-1-349-19795-8_24

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