Reducing inequalities by minimum wages

Transcription

1 Institut Arbeit und Qualifikation Gerhard Bosch Reducing inequalities by minimum wages Nicos Poulantzas Institute Athens 12th of December 2018 Prof. Dr. Gerhard Bosch Universität Duisburg Essen Institut Arbeit und Qualifikation Forsthausweg 2, LE, Duisburg Telefon: +49 (0)203 / ; Fax: +49 (0)203 / gerhard.bosch@uni-due.de;

2 Contrasting views on minimum wages (MW) and collective bargaining CCB) (I) Main stream economists, IMF, World bank: Labor market institutions barrier to downward wage flexibility Negative impacts on employment Trade-off between equality and employment Abolition/weakening of MW/CB has no negative side effects on demand, innovation, skills, welfare state, trust and democracy.. Quelle/ Source:

3 Contrasting views on MW and CB (II) Alternative view: Important instruments to reduce inequality of market incomes Important built-in-stabilizers in economic crisis Levelled playing field for companies And some can be s of good social partnership Source of internal flexibility beneficial substitute for unhealthy high levels of hiring and firing Reduction of bureaucracy and transaction costs selfregulation instead of state intervention Fair competition increases incentives to invest in skills Positive wider societal effects: Trust and democracy Quelle/ Source:

4 Economics should be an empirical science not a religion - Impact of MW and CB an empirical question What did recent research found? - Meta-Studies on MW-Research : No effects on employment (example: Wolfson/Belman 2013) - Countries with co-ordinated CB have higher employment and lower unemployment (OECD 2018) - the erosion of labour market institutions in the advanced economies is associated with an increase of income inequality (Jaumotte/ Buitron 2015: 27, International Monetary Fund). - And underestimation of the multiplier-effects of wage cuts (case of Greece) :

5 Source: EU Commission, own compilation -10 Underestimation of multiplier effects: Forecast Errors on Greek GDP by EU Commission Fall 2014 Spring 2008 Spring 2015 Fall 2016 Spring 2014 Fall 2008 Spring 2017 Fall 2017 Spring 2011 Fall 2009 Spring Spring Spring 2010 Fall 2015 Spring 2013 Fall 2012 Spring 2008 Fall 2008 Spring 2009 Fall 2009 Spring 2010 Fall 2010 Spring 2011 Fall 2011 Spring 2012 Fall 2012 Spring 2013 Fall 2013 Spring 2014 Fall 2014 Spring 2015 Fall 2015 Spring 2016 Fall 2016 Spring 2017 Fall 2017

6 OECD Employment Outlook 2018 on CB Quelle/ Source:

7 Share of low wage earners Less low wage earners with higher level of MW s 30 Correlation: -0, CZE EST LTU PL GRC DE IRL GB NL ESP SVK LVA HUN ROU SVN LUX 10 PRT FR 5 BEL TUR Source: Eurostat, Schulten (WSI), own calculations Minimum wage in % of the median wage of a full-time earner

8 Rate of coverage by collective agreements and share of low-wage work (2014) Source: Visser 2015, Eurostat, own calculations

9 Links between MW and CB important MW important but not the silver bullet an important baseline for wages but no guarantee for fair remuneration of skills, responsibility, hard working conditions.. Only Collective Agreements with differentiated pay scales can guarantee fair remunerations create stable middle incomes classes Links between MW and CB very different across Europe Quelle/ Source:

10 Wage distribution in a liberal market economy with MW and in coordinated market economy with high coverage by collective agreements :

11 below 3 3,00 until < 4,00 4,00 until < 5,00 5,00 until < 6,00 6,00 until < 7,00 7,00 until < 8,00 8,00 until < 9,00 9,00 until < 10,00 10,00 until < 11,00 11,00 until < 12,00 12,00 until < 13,00 13,00 until < 14,00 14,00 until < 15,00 15,00 until < 16,00 16,00 until < 17,00 17,00 until < 18,00 18,00 until < 19,00 19,00 until < 20,00 20,00 until < 21,00 21,00 until < 22,00 22,00 until < 23,00 23,00 until < 24,00 24,00 until < 25,00 25,00 until < 30,00 30,00 and more Two real cases: UK 2014 and Germany Germany Source: : SOEP 2012, own calculations; Dickens (2015): The Low Pay Commission and the National Minimum Wage. Presentation to NEDLAC

12 Extended Collective Agreements Collective Agreements Minimum Wage Minimum Wage for skilled work France Belgium UK Hungary Denmark Germany Coverage by CA s 2015/ ,5 96,0 26,3 22,8 84,0 56,0 Minimum Wage: Kaitz-Index ,5 49,5 49,0 51,2 46,7 Type Direct Interaction Distant Co-Existence Isolated MW Extensive MW Autonomous CB Mixed Model

13 : Positive ripple effect of new German MW up to the 5 th decile (Nominal growth in contractual hourly pay over two years by deciles )

14 Employment in Germany : no negative impact of the new MW

15 Conclusion Clearly positive impacts of MW s and CB on income distribution and no negative effect on employment MW important but not the silver bullet Close links with CA s with their differentiated pay scales required creates the middle income classes