-
31-MAY-2018
Eurozone wages broadly flat despite declining unemployment rates
- PwC analysis suggests that Eurozone wages are becoming more unresponsive to lower unemployment rates – similar to the US and the UK
- Analysis also finds European Central Bank (ECB) and new EU member states have helped to contribute to this trend
The labour markets in advanced economies have (almost) never been better. But despite tightening labour markets, wages have not yet picked up as economic theory would predict.
But what has been putting this downward pressure on wages? And more importantly, will wages pick up?
In the latest Global Economy Watch, PwC economists turn their attention to Eurozone labour markets, by modelling the relationship between unemployment and wages. They found that—similar to what has been observed in the US and the UK—this relationship has become flatter and weaker.
Barret Kupelian, senior economist at PwC, comments:
“A number of factors could explain this trend, some of which have been common across most advanced economies. These include the gradual decline of unionisation, which reduces the bargaining power of labour, the digitalisation of work and the gradual rise of the gig economy, as well as other changes in the structure of the economy.”
Focusing on the Eurozone, PwC economists found that there are more specific factors which explain why the link between unemployment and wages has weakened, but also has shifted. These include:
- The creation of the European Central Bank, which adjusted downwards the inflation expectations of workers in Southern Eurozone economies, which typically used to experience high rates of inflation
- Admission of Eastern European economies, some with lower income levels, which made labour supply more elastic over time.
What does this mean for the future? Barret Kupelian, senior economist at PwC, comments:
“Assuming no other change to structural factors, future wage increases in the Eurozone are likely to be dependent on productivity increases rather than slack in the labour market. This places a greater onus on governments and businesses to boost the productivity level of their workforce by investing in hard infrastructure such as roads, airports and other utilities, and soft infrastructure including formal education, vocational and other training. Productivity improvements are a prerequisite for continued income growth in the future.”
To download a copy of the Global Economy Watch, visit www.pwc.com/gew
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with more than 236,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
© 2018 PwC. All rights reserved
Press Release and Documents
Media
Contacts
-
Rowena MearleySenior Manager, Global CommunicationsUnited Kingdomrowena.mearley@pwc.com-+44 7730 598 643
-
Andrea PlasschaertSenior Manager, Global CommunicationsSwitzerlandandrea.plasschaert@ch.pwc.com+41 58 792 9123+41 79 599 9567
More from News releases
-
Responsible investment and sustainable development growing priority for private equity finds PwC survey
-
Most acquisitions and divestments don’t maximise value – even when some dealmakers think they do. But acquirers who prioritise value creation at the onset outperform peers by as much as 14%
-
Traditional cost-cutting measures aren’t enough to solve current profitability crisis in Financial Services industry
