Low wage growth benefits employment during crisis recovery

CFM Survey(CFM Expert Survey) – Low growth of real wages has had a positive impact on European employment rates during the recovery phase of the Great Recession, according to the majority view of the latest Centre for Macroeconomics and CEPR expert survey. Asked about the quite different behaviour of wages in the UK relative to the big Eurozone economies, another strong majority of respondents agrees that the dire performance of UK real wage growth is in large part due to the country’s labour market policies, which provide workers with comparatively weak protection.

Question 1: Do you agree that lower real wage growth was beneficial for employment levels during the Great Recession?
My answer: Strongly agree
Confidence level: Extremely confident
Comment: Lower real wage growth might be beneficial for economic growth and employment in the short to medium term but can be detrimental for economic growth and employment in the (very) long term because it hampers innovation that is necessary for increasing efficiency and productivity growth.

Question 2: Do you agree that the different behaviour of UK real wages relative to Eurozone wages during the Great Recession is in large part due to the UK having different labour market policies?
My answer: Strongly agree
Confidence level: Extremely confident
Comment: The different behaviour of UK real wages relative to Eurozone wages is indeed in large part due to the UK having different labour makets policies, particularly by its more flexible labour markets. Labour markets in France and Germany are less flexible resulting in more unemployment there. The election of Macron may have big consequences for the flexibility of French labour markets.

  • Read the related article on VoxEU
  • Read more on this CFM Survey
  • my CFM Expert Survey page
Dit bericht is geplaatst in CPB, in English, internationale economie, macroeconomie, Nederland, politiek, Sylvester. Bookmark de permalink.