Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Abstract

Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wagesetting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms' adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey. JEL: E24, J30, J52, J68 This evidence thus suggests a simple taxonomy of countries as regards their unemployment and GDP performance during the European sovereign debt crisis (2010-13):  Group I: countries where the unemployment rate decreased and GDP increased (the Czech Republic,

Wage dynamics and worker mobility during deep recessions

“…The evidence strongly suggests that Spanish wages are much less flexible than Latvian wages. This conclusion is in line with firm-level data, reported in Izquierdo et al (2017). According to the WDN survey only 1.5% of firms cut wages in 2010 in Spain, while this number was 10.6% in Latvia, reaching 77% among those that suffered negative economic shocks (defined as a strong decline in demand and credit restrictions).…”

“…This paper contributes to the extensive literature on cross-country comparisons of labour market responses to the Great Recession (Izquierdo et al, 2017;Jimeno et al, 2015). It also adds to the studies on the level of wage flexibility in our sample countries (Brauksa & Fadejeva, 2013;Fadejeva & Krasnopjorovs, 2015;Izquierdo & Jimeno, 2015; by exploring comprehensive administrative data and by analyzing beyond those who stay at the same job and providing evidence of wage rigidity for job changers.…”

“…Brauksa & Fadejeva, 2013;Jimeno, Casado, & Fernandez, 2015) or Eurosystem's Wage Dynamics Network (e.g. Izquierdo et al, 2017) survey of firms, to analyze wages and worker dynamics. In this paper we exploit a panel of social security administrative data from Latvia and Spain to identify the impact of wage rigidity in employment flows during the Great Recession that followed the financial crisis of 2007-2008.…”

Generating employment, raising incomes and addressing poverty in Greece

“…The amended framework gave firms flexibility to lower wages, and allowed the crisis adjustment to shift from cutting jobs to reducing wages. They most often did this by entering firm-level agreements (Cholezas and Kanellopoulos, 2015;Daouli et al, 2016;Izquierdo, et al, 2017;Visser, 2016). Such agreements surged from a handful before the changes to 976 in 2012, covering the majority of workers (Figure 9), before the number of new agreements stabilised at near half of this level in recent years.…”

A General Framework For A Standardized Competence Assessment Procedure

“…As is well known, in these last fifteen years several European countries experienced the increase in the unemployment rate and were engaged in structural reforms of their labour markets to become more competitive (Izquierdo et al, 2017). This events forced the public decision makers to adopt a more complex vision about what is and how to proper manage employment rates, mainly taking into account that employability can be divided into two main dimensions: the internal employability, that refers to the job-related abilities, skills and knowledge of individuals; the external employability, that refers to the prevailing state of the external labour market that can affect the extent to which individuals may find an employment (Caricati et al, 2016).…”