Many international economic institutions share the idea that collective bargaining should take place at the level of individual companies. For example, the OECD, as far back as its 1994 Jobs Strategy, pushed for more firm level bargaining by insisting that the instrument of administrative extension of collective agreements to all firms within a given sector […]
OECD Meets Piketty: An Alternative Economic Narrative
Today’s profits are not tomorrow’s investments A picture can say more than a thousand words. This is certainly true for the set of graphs (see below) that the OECD published in its latest Economic Outlook and that show the rate of return on fixed assets – a proxy measure for the rate of profitability on […]
How The OECD Wants To Make Globalisation Work For All
Worried by the populist backlash against globalisation, a big crowd of ministers, politicians and economists participated last June in the annual OECD week in Paris to discuss how to make globalisation work for everyone. While a multitude of panels and presentations stressed the benefits of economic openness and trade, the papers and publications which the […]
Has The OECD Joined The Campaign For Higher Wages?
Weak wages produce a weak recovery Trade unions tend to see wages not as a factor of competitiveness but as an engine that drives demand, growth and jobs. The Economic Outlook published this week by the OECD supports this view as it explains the lacklustre economic that is going on via the stagnation of wage […]
The OECD And Job Protection: New Findings But Old Policy Recipes On ‘Your Wage Or Your Job’
One of the key findings from the 2016 Employment Outlook just released by the OECD is that easier firing does not create jobs. Moreover, the OECD also finds that loosening job protection in the middle of an economic downturn results in immediate and substantial job losses. However, instead of cautioning policy makers against the danger […]
Central Banks Warm To Collective Bargaining
Something peculiar is happening. Up until recently, many central bankers were looking at robust collective bargaining and wage formation systems as a possible source for inflationary wage developments. Indeed, central banks, and the ECB in particular, have on numerous occasions called for more flexible and decentralised (read: weakened) wage bargaining systems so as to remove […]
Break The Vicious Circle Of Falling Prices And Wages
The IMF has recently released its latest World Economic Outlook (WEO) Update pointing to persistently weak growth and another downward revision of its projected growth rates for 2016 and 2017 by 0.2 percentage points in each year. Despite this, the IMF’s growth trajectory still sees the world economy recovering slightly from the weakness it experienced […]
How Germany Gains From The Euro While Others Pay
The ‘non-paper’ which Wolfgang Schäuble presented to his fellow finance ministers at a recent ECOFIN council in Luxemburg (leaked by the Handelsblatt newspaper) represents something of a paradox. One of its main ideas is that the euro area lacks a procedure that could declare member states bankrupt when having lost access to financial markets. This […]
The German Minimum Wage Is Not A Job Killer
Mainstream economists excel in scaremongering about the dismal effects any policy that tries to correct market forces may have on economic performance. By arguing that such a policy will destroy jobs, things are even turned upside down. Because of the presumed job losses, social policy suddenly becomes anything but social while liberal economic policy is […]
Democracy And Monetary Union: How Not To Do It
With the showdown between the “institutions” and Greece catching the headlines of policy discussions across Europe, the publication of the report on completing Economic and Monetary Union (EMU) has almost been lost from sight. The report, signed this time by five presidents including the President of the European Parliament, raises several interesting issues ranging from […]
Labour Market Deregulation and Productivity: IMF Finds No Link
New research by IMF staff has found there is no evidence that reforms that deregulate labour markets have any positive impact on increasing the economy’s growth potential. As labour market deregulation has been a key ingredient in the IMF and troika’s financial bail-out programmes in several European member states, this raises serious questions about the […]
European Economic Governance And Flawed Analysis
Getting Stupid Capital Flows Off The Hook The analytical note on the next steps for better economic governance that was published mid- February during the informal European Council reopens the discussion on how to obtain a strict coordination of national economic policy making in the Euro Area. Or, to put it more bluntly, how to […]
How To Improve The ECB’s QE Programme
With up to €60 bn of debt a month being bought for the next 19 months, the ECB’s programme of quantitative easing (QE) is massive. But its programme suffers from three major shortcomings (see below). These shortcomings imply that the ECB’s QE programme, even if it does represent a major leap, needs serious redesigning. It […]
Why Austerity Is Contagious
Austerity is contagious: The case of France France is finding itself between a rock and a hard place. On the one hand, with 54% of companies reporting in the third quarter 2014 that they find activity constrained by a lack of customers, the main problem is clearly on the side of demand. On the other […]
Lessons From 15 Years Of Japanese Deflation
While Mario Draghi has stolen the show with his speech at Jackson Hole, another speech by Haruhiko Kuroda, governor of the Bank of Japan, is actually even more interesting. Kuroda’s introductory remarks are short and simple and they concern the 15 years of deflation Japan has experienced since the mid-nineties. The key lesson is that a […]
Europe Does Not Understand Deflation And Wages
Led by the IMF, the main body of mainstream economists is now aware of the danger that debt deflation is raising for several Euro Area member states. This awareness is surely a good thing. However, what is conspicuously absent in this discussion is the link with wages. It is as if ‘lowflation’ (as the IMF […]
DG ECFIN And The Missing Greek Exports
Economists at DG ECFIN are starting to notice something we have pointed out already some time ago: Despite an enormous cut in wage costs, Greek exports have firmly stayed put in recessionary territory and hopes for an export-led recovery have proven to be illusive. Troubled by this failure of Greek exports to lift off, DG ECFIN […]
European Wage Depression Since 1999
Probably one of the most popular slogans of the entire European Semester is the catchphrase that wages should be aligned with productivity. The reason for its popularity is that this phrase can be used with a lot of flexibility. On the one hand, the Commission can make use of it to discipline wages and undermine […]