The empirical case for a wage-led recovery policy for Europe

Ozlem Onaran and Thomas Obst

No 14097, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: The Europe 2020 strategy of the European Commission (EC) as well as the national reform and stability programmes attribute a central role to wage moderation policies. Real wage growth below productivity growth and policies to deregulate the labour market in order to achieve this are recommended to increase the international competitiveness of the EU. However, the track record of these policies in the last three decades has been poor growth performance along with a declining share of wages in national income and rising inequality. Our results of a new project for the Foundation for European Progressive Studies (FEPS) show that the EC policy of wage moderation is counter-productive, and leads to a stagnation in growth, risk of deflation, and destabilizing growth models driven by debt or export surpluses in the absence of a healthy growth in wages.

Keywords: wage share; growth; Europe (search for similar items in EconPapers)
Date: 2015-06-01
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