Wednesday, July 6, 2011

The wageless recovery and the two-speed recovery

Is this a wageless recovery? No doubt in the United States, and also in a good part of the rest of the developed world (e.g. Europe and Japan).  In the case of the US real wages have stagnated since the 1970s.  The recovery may very well be wageless, but in all fairness that has been a perennial characteristic of the American economy.  In Europe there were marked differences between Greece and Iceland, where real wages were growing until the crisis, and Germany, where they have basically stagnated.  So the wageless recovery is basically an American, German and Japanese story.

In developing countries, however, the story is quite different.  The graph below shows real wages in advanced, Latin American and Asian economies (there are also significant variations between and within the two sub-regional groups).  The graphs come from the International Labour Office's Global Wage Report 2010/11 (available here).

Note that both in Asia and Latin America real wages did not fall in 2008, and started to recover in 2009.  In Latin America, according to ECLAC (in the Preliminary Overview Statistical Annex Table A-18, p. 150) in 2010 real wages increased on average 1.7 per cent.  Essentially at the same pace than the previous years.  Also, it seems that wages continue to grow in Asian countries (particularly in urban China).  Perhaps, the reason for the so-called two-speed recovery is associated to the different patterns of real wage dynamics, and not just about commodity prices.  Expansion of domestic demand in the periphery (or at least in some countries) might be relevant too. Just saying.

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