Temporary employment puts a drag on wage growth with macroeconomic consequences

Lukas Lehner, Paul Ramskogler, Aleksandra Riedl

During the past decade, subdued wage growth and a faulty Phillips curve have puzzled economists. This column proposes an explanation: involuntary temporary workers have exerted significant competitive pressure on permanent workers, slowing overall wage growth. Using data from 30 European countries over the period 2004 to 2017, the authors incorporate temporary employment into the standard wage Phillips curve. Their findings reveal a competition effect that is comparable in magnitude to that of the unemployment rate, particularly in countries with weak wage-setting institutions.

Πηγή: Voxeu

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