{ "title": "European Wage Dynamics and Spillovers", "publication": "IMF Working Papers, July 19, 2019", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986", "canonical": "https://www.imf.org/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986", "overlayPath": "/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/index.md", "summary": "Wage rises have remained stubbornly low in advanced Europe in recent years, but, at the same time, newer EU members are experiencing rapid wage acceleration. This paper investigates the drivers of this wage divergence.", "sections": [ { "heading": "Overview", "content": "- Author: Yuanyan S Zhang\n- Publication date: July 19, 2019\n- Series: Working Paper No. 2019/156\n- Pages: 29\n- Volume: 2019\n- Issue: 156\n- DOI: https://doi.org/10.5089/9781498319294.001\n- ISBN: 9781498319294\n- ISSN: 1018-5941" }, { "heading": "Key findings", "content": "- Wage rises have remained stubbornly low in advanced Europe in recent years, while newer EU members are experiencing rapid wage acceleration.\n- Econometric analysis using error correction models suggests that:\n - Wage growth responds more quickly to changes in unemployment in the newer EU members than in advanced Europe.\n - In advanced Europe, wages are more closely related to inflation and inflation expectations in the short run, implying greater inertia in nominal wage rises.\n- In the years after the global crisis, wage inertia in advanced Europe contributed to the build up of a real wage overhang relative to sharply slowing labor productivity, which subsequently dragged on nominal wage rises even as unemployment began to decline.\n- Spillovers of subdued wage growth between euro area countries also weighed on wage rises in advanced Europe." }, { "heading": "Thematic analysis (drivers and mechanisms)", "content": "- Labor market responsiveness:\n - Newer EU members: faster wage adjustment to unemployment changes.\n - Advanced Europe: stronger short-run link between wages and inflation/inflation expectations; greater nominal wage inertia.\n- Real wage and productivity dynamics:\n - Post-global crisis period featured sharply slowing labor productivity.\n - Real wage overhang emerged relative to productivity, constraining subsequent nominal wage growth despite falling unemployment.\n- Cross-country spillovers:\n - Subdued wage growth in some euro area countries transmitted to other advanced European economies, further weighing on overall wage rises." }, { "heading": "Subject classification and keywords", "content": "- Subject: Labor, Labor markets, Real wages, Unemployment, Unemployment rate, Wages\n- Keywords: D. wage outlook, EU member, Euro Area excl. Germany, European Union, Global, growth dynamics, Labor markets, non-employment, pay, Phillips curve, Real wages, spillovers, SpilloversEuropean wage dynamics, trend labor productivity, Unemployment, Unemployment rate, wage acceleration, wage growth, wage rise, wages, WP\n\nSource: IMF Working Paper \"European Wage Dynamics and Spillovers\" (Working Paper No. 2019/156) by Yuanyan S Zhang, July 19, 2019.\n\n---\n\n Content in this bundle\n\n- Working Paper\n - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/index.md)", "[Structured JSON version](/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/index.json)", "[Bundle manifest](/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/bundle-manifest.json)", "Authors: Yuanyan S Zhang", "Published: July 19, 2019", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781498319294.001", "Author: Yuanyan S Zhang", "Publication date: July 19, 2019", "Series: Working Paper No. 2019/156", "Pages: 29", "Volume: 2019", "Issue: 156", "DOI: https://doi.org/10.5089/9781498319294.001", "ISBN: 9781498319294", "ISSN: 1018-5941", "Wage rises have remained stubbornly low in advanced Europe in recent years, while newer EU members are experiencing rapid wage acceleration.", "Econometric analysis using error correction models suggests that:", "In the years after the global crisis, wage inertia in advanced Europe contributed to the build up of a real wage overhang relative to sharply slowing labor productivity, which subsequently dragged on nominal wage rises even as unemployment began to decline.", "Spillovers of subdued wage growth between euro area countries also weighed on wage rises in advanced Europe.", "Labor market responsiveness:", "Real wage and productivity dynamics:", "Cross-country spillovers:", "Subject: Labor, Labor markets, Real wages, Unemployment, Unemployment rate, Wages", "Keywords: D. wage outlook, EU member, Euro Area excl. Germany, European Union, Global, growth dynamics, Labor markets, non-employment, pay, Phillips curve, Real wages, spillovers, SpilloversEuropean wage dynamics, trend labor productivity, Unemployment, Unemployment rate, wage acceleration, wage growth, wage rise, wages, WP", "**Working Paper**" ], "related": [ { "title": "Working Paper", "role": "paper", "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019156.pdf", "summary": { "path": "/-/media/files/publications/wp/2019/wpiea2019156.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/wp/2019/wpiea2019156.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/index.md", "json": "/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/index.json", "bundleManifest": "/en/publications/wp/issues/2019/07/19/european-wage-dynamics-and-spillovers-46986/bundle-manifest.json" }, "generatedAtUtc": "2026-09-18T15:33:21.440Z" }