1. TURI-seminar IRES, Paris 28 September 2015
Structure of presentation:
1.) Broader political context of the public-private pay debate: in particular the role public sector wages within the current crisis management
2.) Look at the underlying assumptions of the current interpretation of the role of public sector wages
3.) Findings of previous studies and why these should be treated with caution
4.) Results of our own investigation of public and private sector pay developments
5.) Policy implications of our findings
You can read all of this in more detail in the report which we put together for this conference.
TURI-seminar IRES, Paris 28 September 2015

2. Output of CAWIE II Project Collectively Agreed Wages in Europe
Grant: European Commission (DG Employment)
Coordination KULeuven-HIVA (Belgium) and WSI (Germany)
Research group:
14 Institutes from the TURI-Network AIAS (Netherlands) FAFO (Norway) AK (Austria) FAOS (Denmark) Associazione Bruno Trentin (Italy) IRES (France) Fundacion 1 de Mayo (Spain ESRITU (Hungary) Instituto Ruben Rolo (Portugal) ETUI (EU) Labour Institute for LRD (UK) Economic Research (Finland)
Guy Van Gyes & Thorsten Schulten

3. Main argument built-up in the book
Critique of the dominating view on wages and its policy implications
Negative implications of this dominating view
Building an alternative strategy: coordinating inclusive growth
Guy Van Gyes & Thorsten Schulten

4. Wages in the crisis – Dominating European policy view
Crisis is essentially seen as a crisis of cost competitiveness
Imbalances are the result of divergent unit labour costs development
Asymmetric view: Wage developments in the deficit countries were “too high” so that they lost competitiveness
Symmetric view: Wage developments in the surplus countries were “too low” (wage-dumping hypothesis)
Guy Van Gyes & Thorsten Schulten

5. Wages and the crisis – Empirical critique of the dominating view
Noélie Delahaie, Sem Vandekerckhove and Catherine Vincent
Chapter 2 Wages and collective bargaining systems in Europe during the crisis
TURI database of 10 countries with statistics on collectively-agreed wages
Dominant story based on evolutions of nominal unit labour costs
(Real) wage trends different (certainly when making abstraction of Germany)
Wages (agreed and actual) grew in line with price increases
Prior to the crisis: almost all countries modest wage growth since the early 2000s when also taking productivity increases into account
Thus: Forgetting the demand-side: diminishing labour share in national income
Plus: Need to take better into account the composition effect of a crisis period (cf. Spanish wage development in the first crisis period => rise in unemployment is not evenly distributed over the wage curve)
Guy Van Gyes & Thorsten Schulten

6. Wages and the crisis – Conceptual critique of the dominating view Torsten Müller, Thorsten Schulten and Sepp Zuckerstätter Chapter 7 Wages and economic performance in Europe
Narrow concept of competitiveness:
exclusive focus on labour costs
regardless of the structure of real economy
regardless of non-price factors
loose relation between wages and export performance
Narrow treatment of wages as cost factor:
Ignorance of the role of wages for domestic demand – wage-led demand growth model = Eurozone
Overestimation of the export sector for the overall economic development
Guy Van Gyes & Thorsten Schulten 6

7. Policy implications of dominating view on wages
New European Interventionism:
Economic Governance:
European Semester/European Imbalances procedure
Half of the EU Member States got already recommendations since 2011
Troika /Memorandum of Understanding
Policy measures:
Direct intervention into wage developments by cutting and freezing public sector and minimum wages
Structural reforms of wage setting institutions to increase downward flexibility of wages
Guy Van Gyes & Thorsten Schulten

8. Main argument built-up in the book
Critique of the dominating view on wages and its policy implications
Negative implications of this dominating view
Building an alternative strategy: coordinating inclusive growth
Guy Van Gyes & Thorsten Schulten

9. Implications of current wage policy
Radical decentralisation and deconstruction of collective bargaining:
Many countries of Southern and Eastern Europe
Decrease of real wages in a majority of European countries:
Internal devaluation in the South
German shadow in the North
(Social) Cost(ly) strategy in the East
Guy Van Gyes & Thorsten Schulten

10. Changes in collective bargaining systems in EU countries under EU, ECB and/or IMF surveillance
Abolition/termination of national collective agreements
Ireland, Romania
Facilitating derogation of firm-level agreements from sectoral agreements or legislative (minimum) provisions
Greece, Portugal, Hungary, Italy, Spain
General priority of company agreements/ abolition of the favourability principle
Greece, Spain
More restrictive criteria for extension of collective agreements
Greece, Portugal, Romania
Reduction of the ‘after-effect’ of expired collective agreements
Possibilities to conclude company agreements by non-union employees
Greece, Hungary, Portugal, Romania, Spain 
Guy Van Gyes & Thorsten Schulten

11. Deconstruction/decentralisation
Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo Leonardi
Chapter 3 Impact of the euro crisis on wages and collective bargaining in southern Europe – a comparison of Italy, Portugal and Spain
Portugal
Spain
2008
2013
Agreements
295 94
5987
3161
Of which company 95 48
4539
2274
Extension
137 9
Workers covered
1,8 million
242 thousand
12 million
8.5 million
Guy Van Gyes & Thorsten Schulten

12. Real compensation in the EU 2010-2014
Guy Van Gyes & Thorsten Schulten

13. Low-cost strategy in the East – Non-developing wage bargaining
Szilvia Borbély and László Neumann
Chapter 5 Similarities and diversity in the development of wages and collective bargaining in central and eastern European countries – a comparison of Hungary, Slovakia and the Czech Republic
Low-wage countries
Wage and social harmonisation with rest of Europe fading
Income policy = government prerogative
Taxes, minimum wage, social transfer
Tripartite dialogue but political domination of agenda
Mainly decentralised collective bargaining
Decreasing organisational strength unions and employers’ organisations
Key example = Hungary
Guy Van Gyes & Thorsten Schulten

14. Shadow of Germany in the North
Søren Kaj Andersen, Christian Lyhne Ibsen, Kristin Alsos, Kristine Nergaard and Pekka Sauramo
Chapter 4 Changes in wage policy and collective bargaining in the Nordic countries –
a comparison of Denmark, Finland, Norway and Sweden
Table 1 Mechanisms for determining wages in the Nordic countries
Coverage of collective agreements in the private sector*
Extension of collective agreements
Regime
Denmark
74% No
Autonomous
Collective bargaining model
Sweden
85%
Norway
50%
Yes, some since 2004
Mixed model
Finland
Yes, widespread
Statutory regulations (and strong unions
Iceland
95%
Figure 1. Developments of average wages and collectively agreed wages in Finland and in Germany : manufacturing (%).
+ Social dumping in the liberalising labour mobility (construction, transport, food industry)
Guy Van Gyes & Thorsten Schulten

15. Growing divergence in demand, inequality, poverty between countries
Non-convergence: internal and external imbalances/inequalities => less social inclusion
Maarten Keune Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective bargaining in the EU
Odile Chagny and Michel Husson Chapter 9 Looking for an ‘optimal wage regime’ for the euro zone
Growing divergence in demand, inequality, poverty between countries
Pre-crisis: see next presentation for details
Non-convergence in productivity; real wages in the service sector, inflation
Since the crisis
Deflation popping up around the corner; sluggish growth
Increased ‘beggar-thy-neighbour’ => high social cost
Loss of a governance instrument
Guy Van Gyes & Thorsten Schulten

16. Main argument built-up in the book
Critique of the dominating view on wages and its policy implications
Negative implications of this dominating view
Building an alternative strategy: coordinating inclusive growth
Guy Van Gyes & Thorsten Schulten

17. What kind of wage policy for inclusive growth?
Thorsten Schulten and Guy Van Gyes
Concluding remarks A transnational coordinated reconstruction of collective bargaining
as a precondition for inclusive growth in Europe
Inclusive growth strategy
Reference in new economic discourse (EU 2020, OECD etc)
Everyone should participate in economic development
Reduction of inequality
Better economic performance
What role for wage policy?
Everybody a fair share
Wage-led demand growth
Unions and organised wage bargaining as countervailing power to market/capital forces
Coordinated wage bargaining (multi-employer, institutionally supported, coordination by centralisation)
= Belief in the own European model of a social market economy
Guy Van Gyes & Thorsten Schulten

18. Towards an alternative view on wages?
Torsten Müller, Thorsten Schulten and Sepp Zuckerstätter Chapter 7 Wages and economic performance in Europe
Stabilising and enforcing wage developments:
counter deflationary price developments
stabilise and increase private demand
counter income inequality
Pushing ‘smart’ productivity growth
Requires …
stop of wage cuts and wage freezes
wages increase at least in line with productivity and target inflation
more expansive wage developments in the surplus countries
Requires … as STRUCTURAL REFORM
Strengthening/reconstruction of wage setting institutions
Guy Van Gyes & Thorsten Schulten 18

19. Towards an alternative view on wages?
Reconstruction of wage-setting institutions in Europe requires as structural reform …
No more restrictions and interventions in autonomous collective bargaining
Jesús Cruces, Ignacio Álvarez, Francisco Trillo and Salvo Leonardi
Chapter 3 Impact of the euro crisis on wages and collective bargaining in southern Europe – a comparison of Italy, Portugal and Spain
Promotion of a higher bargaining coverage
Maarten Keune Chapter 8 Less governance capacity and more inequality: the effects of the assault on collective bargaining in the EU
Promotion of multi-employer bargaining
“The impulse to collective industrial relations in the UK private sector has not entirely disappeared and might be re-kindled under the right circumstances”
Lewis Emery
Chapter 6 Multi-employer bargaining in the UK – does it have a future?
Guy Van Gyes & Thorsten Schulten 19

20. Reconstruction: European minimum Wage Policy
Thorsten Schulten, Torsten Müller and Line Eldring
Chapter 10 Prospects and obstacles of a European minimum wage policy
Current situation: rather low MWs at rather low level
Future: 60% of the median wage 28 million workers in the EU ! (2010)
Guy Van Gyes & Thorsten Schulten

21. Institutional support: Can extension mechanisms support the reconstruction of collective bargaining ?
Thorsten Schulten, Line Eldring and Reinhard Naumann
Chapter 11 The role of extension for the strength and stability of collective bargaining in Europe
A high bargaining coverage usually requires some form of state support through extension or functional equivalents
Current attempts at national and European level to reduce or even to abolish extensions lead to a strong decline of the bargaining coverage
European policy to strengthen collective bargaining would require a European initative to promote extension
Guy Van Gyes & Thorsten Schulten

22. What next? Macro-economic challenges Political challenges
A European Solidaristic Wage Policy: Is there an optimal wage coördination (rule) beyond the national?
Macroeconomic Coordination: How to coordinate Wage with Monetary and Fiscal Policy?
Political challenges
How to strengthen European wage coördination? What actors? What instituions?
How to bring economic democracy in European governance
Guy Van Gyes & Thorsten Schulten

23. Thank you very much for your attention !
Free download:
Thorsten Schulten Guy Van Gyes WSI HIVA
Guy Van Gyes & Thorsten Schulten