Unemployment, wages and collective bargaining in the European Union

Eckhard Hein and Thorsten Schulten
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Thorsten Schulten: WSI in der Hans Boeckler Stiftung

Macroeconomics from University Library of Munich, Germany

Abstract: The paper questions the predominant view on unemployment and wages in the European Un-ion 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 unem-ployment 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 decentralisa-tion 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 macro-economic policies.

Keywords: European employment policy; wage theory; wage trends; collective bargaining (search for similar items in EconPapers)
JEL-codes: E24 J50 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-12-10
New Economics Papers: this item is included in nep-bec, nep-eec and nep-mac
Note: Type of Document - pdf; pages: 30
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Unemployment, wages and collective bargaining in the European Union (2004)
Working Paper: Unemployment, Wages and Collective Bargaining in the European Union (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0412006

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