Therefore, the ETUC:
- fully supports the bargaining campaigns of its affiliated trade unions to conclude higher wage deals, in particular in countries that experienced excessive moderation undermining domestic demand and growth.
- warns the ECB that inflationary wage developments are a long way off and that it should not confuse any increase in wage growth with inflationary wage developments.
- urges European Finance Ministers, the ECB and the Commission to respect the autonomy of collective bargaining.
- invites economic policy makers to do a thorough analysis of the European labour market, showing that the potential for the labour market to support robust growth and the creation of more and better jobs is vast.
The European Central Bank is hiking interest rates to get something it already has. Collectively agreed wages have been compatible with price stability for more than a decade. If the ECB does not realise its mistake and continues hiking interest rates, long-awaited recovery will be endangered, says ETUC General Secretary John Monks.
European economic policy-makers have discovered the issue of wages. The European Central Bank is likely to hike interest rates again tomorrow because of what it calls higher than expected wage increases. And last week, the European Council of Finance Ministers sent a confused message saying that workers should now start benefiting from growth but that wage moderation should continue.
The ETUC wants to set the discussion on wages straight:
- The ETUC is in full support of the bargaining campaigns of affiliated trade unions to conclude higher wage deals, in particular in countries where wage moderation has been excessive. The economy needs higher wage growth to support household consumption and to turn a short term export/investment-led recovery into long-term and self-supportive growth.
- Even with stronger collectively bargained wages, there is no danger of inflationary wage hikes. Signals from recent collective bargaining developments are mixed, with some trade unions going for higher wage demands while others are forced to continue wage moderation. Experience over the last ten years tells us that collectively bargained wages already take the objective of price stability into account by compensating for low inflation and a limited part of the productivity increase (see graph).
- Neither is there an inflationary danger coming from wage dynamics over and above collectively bargained wages. An analysis of the European labour market shows that, even with unemployment lower than 8%, labour bottlenecks remain limited and there is still a sizeable reserve of skilled labour available. Over the longer run, the real key to avoiding inflationary wage developments despite falling unemployment lies in well-targeted structural reforms that expand the available reserve of labour. This implies training for the unemployed (both for the short-term unemployed, who make up more than half of total unemployment, and for the longer term unemployed), access to care facilities so that more part-timers could decide to work full-time, and the right to a full-time job for the 17 million part-timers in Europe who say they are unable to find a full-time job.
- The ETUC regrets that wages and collective bargaining are being discussed by European Finance Ministers and the ECB without the social partners having the opportunity to give their opinion and advice. The ETUC warns both an independent ECB, the Ecofin council and the Commission to respect the autonomy of collective bargaining. While the ETUC and its affiliates are ready to explain to and discuss with central bankers and Finance Ministers how collective bargaining works, it should be clear that the social partners remain responsible for collective bargaining.
Graph: Collective bargained wage increases already compatible with the price stability objective for the past 10 years