Hourly labour costs in Europe: largest decrease in Greece, largest increase in Estonia (graph)
from Merijn Knibbe
Update. It is remarkable that the quarterly national accounts for Germany, first quarter of 2012, published on may 25, see link below, do contain elaborate data on hourly wage costs in Germany while this information (showing low wage increases in Germany) is not included in the Eurostat table, published three weeks later.
Do we need a world-wide increase of real wages (China, USA, Europe)? Probably. Is it happening? Not yet: new data on labour cost from Eurostat (total wages divided by total hours, first quarter 2012) shows that in most EU countries wage increases were lower than the rate of inflation. Some cherries:
* No data for Germany, these can be found here (+2,0%, table 2.18. Not exactly the same definition, but for 2012 differences were limited)
* No data for Greece. Third quarter data for 2011 (latest data available on Eurostat) however show a 7,5% decrease which followed an about equal decrease in 2010.
* Estonia, darling of the Austerians, however shows a 7,2% increase in the first quarter of 2012.
* The Netherlands, which are at this moment pursuing an aggressive, even ruthless, export strategy despite the fact that they already have the highest current account surplus of the EU witnessed a very low increase of wages which, contrary to the situation in Belgium, Austria and Germany, is also quite a bit lower than in Italy, Spain and Portugal. By the way – Dutch retail sales in April: -6%. Dutch exports in April: +6%.
My opinion is that wage cuts in the transition countries are fighting a straw man, as wages in these countries are only about as high as a hundred years ago in the UK and Germany, while relative wages in these countries are also much lower than relative productivity (for the record: German wages of the nineties of the twentieth century were the highest of Europe – which really is a different situation). Nobody should be afraid of a 7,2% increase in a country like Estonia – there are ample ways to increase productivity. But the difference between the poster child of the Austerians and Greece is ironic.
Sideline: is there a downward EU wage/price spiral at the moment?
Increased gap between rich and poor since 1980, dramatic increase in private debt after the same date; obviously low wage rates, once borrowing capacity was reached, could not sustain the economy. That’s been OBVIOUS for decades. Yes, raise the incomes of the middle classes by depriving those with the power to suppress them out.
“Nobody should be afraid of a 7,2% increase in a country like Estonia – there are ample ways to increase productivity. But the difference between the poster child of the Austerians and Greece is ironic.”
I don’t see why this is ironic – I think it is merely evidence in favor of “austerity”. Austrian economists would say that this is precisely what they would hope for – the government cuts back public spending to allow the private sector to flourish, and of course as private firms bid for employees unemployment falls and wages rise. It’s true that wages need to flexible and might fall at first to help spur recovery, but hopefully within a couple of years of a public-austerity plan wages should rise again. This fully supports Austrian arguments in favor of austerity.