1. INFLATION STUBBORNESS IN EMU : ARE WAGES TO BLAME ?

2. ‘STICKY’ INFLATION FROM 2000 ONWARDS

3. …in contrast with past slowdowns

4. Negotiated wages

5. BACKGROUND : Promise of EMU

6. Background : Falling wage share in GDP

7. Background : Restored profitability (‘60—’72 equals index 100)

8. TOTAL WAGES : Negotiated wages + wage drift + or – taxes) (COMPENSATION PER HEAD)

9. UNIT WAGE COSTS….

10. … explained by setbacks in growth of labour productivity

11. US – experience : Supporting growth is good for price stability

12. US experience

13. Wages and inflation : A rule of thumb  Nominal unit wage costs in line with the price stability target  In that case :  Real wages are in line with productivity  Wage compensation for inflation equals ECB’s inflation obejective  No pressure on profit margins  No wages and prices running after each other’s tail

14. APPLYING THE RULE OF THUMB

15. If ‘levels’ of wage increase in line with price stability, what about its small-reaction to the growth slowdown ?

16. One explanation : Wages as the victim of ‘succesful’ wage moderation ?

17. Another explanation  With inflation already at an historical low, the ‘Keynesian’ downwards nominal wage rigidity may ‘bite’.  What mandat for a central bank ?

18. Implications for monetary policy  Watch out for the deflation trap !  Instead, support growth and employment while keeping price stability by riding the Philips curb