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 Rise Of The “Super Firms” And Inequality
Mainstream economic thinking often tries to explain the trend of high and rising inequalities by referring to the forces of technology. Technological progress, so the argument goes, works to destroy middle pay routine jobs while at the same time creating many high skilled jobs. There is, however, increasing recognition that this ‘technology’ factor is but […]
German Economy Ministry Backs Up OECD Call For Public Investment Stimulus
In European and international economic policy discussions, Germany (also thanks to its finance minister Wolfgang Schaüble) is renowned for taking up the role of fiscal policy watchdog. Any call, such as the OECD’s proposal to escape low growth by having a coordinated fiscal policy impulse, in particular in an economy such as Germany with its huge […]
OECD: Simulating “Tax Stimulus” – Questioning Stability Pact Rules
The latest OECD’s Economic Outlook (EO) contains several surprises. First, it argues for a rethink of the current fiscal policy stance. Secondly, it forecasts an acceleration of the recovery in the OECD because of a major fiscal stimulus in the US. Last but not least, the OECD tackles the Euro Area’s Stability Pact and proposes […]
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 […]
Collective Bargaining And Rising Inequalities: Do The OECD And IMF Get It?
In a paper published in spring 2015, the IMF’s research department made the case for trade unions and collective bargaining as a powerful tool to keep inequalities in check. Whereas previous literature and statistics were already showing the existence of such a link, the IMF paper went even further by pointing out that trade unions […]
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 […]
Lost In Contradiction: The IMF And Competitive Wage Dumping In The Euro Area
A staff discussion note published recently by the IMF addresses the argument that squeezing wages across a large part of the euro area is dangerous and deflationary as it will not improve anyone’s relative competitive position while undercutting domestic demand everywhere. Since the IMF has always been a staunch advocate of the ongoing euro area […]
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 […]
Questions For The Left From The Greek Debacle
There is no point in denying reality. By crushing a rebellious Greek government and disciplining its voters, the ‘Masters of Austerity’ have won a great victory. Implications extend far beyond Greece itself. What is now being inflicted upon Greece rams home the message that the dismal results of austerity policy are preferable compared to the […]
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