Roel Beetsma's picture
Affiliation: 
University of Amsterdam
Credentials: 
Professor of Economics

Voting history

Wages and economic recoveries

====================================================================

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?

====================================================================

Answer:
Agree
Confidence level:
Confident
Comment:
Cumulative differences in inflation rates probably go a long way explaining the wage gap of the UK relative to other countries. However, it is doubtful that continental European institutions would have allowed for substantial real wage erosion, so it is probably the combination of differences in inflation rates and differences in labour market institutions (more flexibility in the UK) that explain the wage gap differences between the UK and elsewhere.

====================================================================

Question 1: Do you agree that lower real wage growth was beneficial for employment levels during the Great Recession?

====================================================================

Answer:
Agree
Confidence level:
Confident
Comment:
A priori I would think that wage growth relative to pre-crisis growth is the endogenous result of demand and supply, which may explain the cumulative wage gap for Germany. Wage growth being endogenous one cannot a priori say that it is beneficial for employment. Nevertheless, institutional arrangements may have an impact on how demand versus supply translates into wage growth. More flexible labour markets translate increasing unemployment in lower wage growth and this seems to have happened in the UK, which has done relatively well in terms of unemployment since the start of the crisis.