Unemployment in Europe is at its lowest rate since records began. In April 2019, the jobless rate across the EU-28 was a mere 6.4%, with Eurozone unemployment coming in only slightly higher at 7.6%. Of course, those numbers hides significant differences between some Member States; in Greece, for example, unemployment is at an eye-watering 18.5%, while Germany is essentially experiencing what economists call “full unemployment”, with an unemployment figure of only 3.2%. Nevertheless, it’s true to say that most European economies are enjoying a period of relatively low unemployment at the moment.
So, crisis over, right? Not so fast. In 2018, the OECD warned of “unprecedented wage stagnation” across Europe. They argue that: “Low inflation and the major productivity slowdown have contributed to wage stagnation, as well as a rise in low-paying jobs” and “a significant worsening in the average earnings for part-time workers relative to full-time workers”.
What do our readers think? We had a comment from Panayotis, from Greece, who complains that European wages have been stagnant for too long. Is he right? Are European wages rising too slowly?
To get a response, we put Panayotis’ comment to Barbara Gerstenberger, Head of the Working Life Unit at the European Foundation for the Improvement of Living and Working Conditions (Eurofound), an EU agency that, among other things, researches living and working conditions across Europe. What would she say?
Well, they have certainly been rising very slowly for a long time, and that is true also for the post-recession period. Between 2012-2014, wage growth has (and certainly for the recipients of those wages) been very disappointing. However, 2015 marked a turning point in that situation and [from that point on] we do see that, in two-thirds of the Member States, real wages have been increasing.
Again, the development in the Member States is very different. We see especially strong wage growth in Eastern European Member States, however we do not yet see this high wage growth in some of the Member States hardest hit by the crisis, such as Greece…
For another perspective, we put the same comment to Jack Ewing, European economics correspondent for the New York Times. How would he respond?
It’s true that wages were stagnant for quite a long time, not just in Europe but around the world. We’re seeing signs now that they’re starting to go up. That’s a function of the fact that in some countries, like Germany, the unemployment rate is very low, and so that forces employers to pay more to get the people that they need. But in countries like Greece, which still have a lot of economic problems, it’s going to take a while before that happens.
Then the question is what are you going to do about that? There’s not a very easy answer. The job market is much more competitive than it used to be, and when you have high unemployment, as you do in Greece, or Spain, or Italy, then employers are not under a lot of pressure to pay more. So, I don’t see an easy solution to that right now.
Are European wages rising too slowly? Do low unemployment rates mask other problems in the labour market? Or will wages rise naturally now that unemployment is down? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!