Wages Are Rising in Europe. But Economists Are Puzzled.
In Europe, experts attribute the spike to an acute shortage of workers in countries like Germany, but there are many other theories.
.. Economists there offered numerous theories to explain the phenomenon. The decline of unions has taken away employees’ bargaining power, some said. Globalization, outsourcing, and the easy flow of money and information across borders have also forced workers in wealthy countries to compete with those in poorer ones.
.. Another suggestion is that the rise of companies like Apple, Google and Amazon as industry behemoths has concentrated power in fewer companies and squelched competition. And the so-called sharing economy, exemplified by Uber or Airbnb, has made many people into freelancers with few benefits.
.. In one much-discussed paper presented at Sintra, Uta Schönberg, a professor at University College London, compared data from Germany and France and came to the conclusion that low wage growth and rising inequality were a result of diminished bargaining power by workers.
Flat wage growth in Germany during the last two decades coincided with reforms that allowed companies to opt out of collective bargaining agreements, weakening union power.
In France, where union agreements applied to whole industries and were binding for companies, wages continued to climb and inequality was less pronounced.
.. But France paid a price. While unemployment fell below 4 percent in Germany, it remains above 9 percent in France. The implication is that companies may not hire as much if they are locked into union wage contracts.
.. This hidden reserve of workers is bigger than economists thought, Mr. Talavera said. But in Europe it appears to have finally been exhausted. “That is one of the reasons you haven’t seen wage growth picking up substantially,” he said.