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Wages begin to rise but purchasing power is maintained

After years of stagnation, the workers of the rich countries already see increases in their payrolls although these are tempered by the higher inflation

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Wages begin to rise but purchasing power is maintained

The flower and cream of world economic policy met last month in Sintra, Portugal. Analysts, central bankers and financiers were looking for answers to a long-time question: why do salaries grow so little? The governor of Bank of Australia, Philip Lowe, said that when he meets with entrepreneurs eager to find skilled workers, he asks m a simple question: why not offer m more money? "They look at me with a face as if I had gone mad," he said.

The experts have been wondering for years about reasons for wage weakness

The anecdote summarizes a well-known situation: in most advanced economies, real wages — that is, calculated after discounting effects of inflation — Renquean. And this happens at a time when, after crisis that will go down in history as Great Recession, west chains years of strong growth, and countries like USA and Germany record levels of employment.

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A recent IMF report claimed that rise in nominal wages in rich countries remained "considerably lower" than before 2008 crisis. And, according to a study by BBVA Research, annual rate of variation of real income in United States was between 2010 and 2017 of only 0.4%, much lower than those of previous two decades. But all this seems to be changing. Different symptoms point to years of restraint in payroll, timidly coming to an end.

"Wages will rebound considerably to 2020 due to labour market tensions and to end of wage restraint measures," says ECB in a document that provides for wage earners in eurozone from 1.6% from 2017 to 2.7% of 2020. In Sintra, president of Eurobanco, Mario Draghi, highlighted recent wage agreements in Germany, France and Spain and end of restrictions in public sector as symptoms of a new dynamic beneficial to pockets of employees.

But good news ends here. Because wage increases will coexist with higher price hikes, driven among or reasons by rising oil, which in two years has more than doubled. The ECB envisages stabilized inflation in eurozone of 1.7%. So final effect for citizens ' pockets will be stagnation or, at best, very shy improvement, y recognize financial sources.

Ruined party

The rise of crude has been eaten one third of rise, according to German economist Carsten Brzeski

Carsten Brzeski, chief economist of ING in Germany, is one of lucky ones who attended conclave of Sintra. He said that re was talk about why, despite sharp fall in unemployment, wages do not rise sufficiently. "This is main concern of central bankers, because it makes it much harder to decide wher or not to put an end to policy of ultracheap money," he says. Brzeski shares idea that inflation is ruining "party" that wage earners in some countries began to enjoy. "In Germany, rise in fuel has eaten more than a third of wage hikes. And with eurozone's underlying inflation at 1%, purchasing power improves very little, "he explains.

Scholars have been debating motives of wage slack for years. And, as usual in se discussions, re are explanations for all tastes: from digitization and automation to statistics that do not correctly collect those who desisted from looking for work in crisis; From retirement of baby boom generation to stagnation of productivity...

"My impression is that although globalization has had a negative impact, overall it does not explain low wage growth. It influences more technological change, which has benefited those with a high level of human capital; The loss of power of trade unions; Or that new technological giants are not intensive in labor and much in capital, "explains Miguel Cardoso, chief economist of BBVA Research for Spain and Portugal.

This expert is more optimistic and believes that unless international economy experiences a negative shock motivated by a trade war or problems in emerging countries, recovery will continue and with it begin to raise real wages. "The issue is how much y're going to do and if y're going to recover lost," Cardoso adds. "There is no reason to believe that salaries will increase significantly." The irony is that trade tensions could lead to a trade war that would increase pay. But in that case inflation would also rebound, so it would have little effect on purchasing power of workers, "replies Brzeski.

In Spain, high unemployment continues to hold payrolls

The joys that workers are receiving in part of rich countries arrive late in Spain. If y do. Last month, trade unions and businessmen signed an agreement that recommended salary increases of 2% plus a variable point and a minimum wage of 1,000 euros per month. But se good intentions collide with statistics. While in eurozone hourly wage rose by 2% last year, increase in Spain was five times lower, of 0.4%, according to Eurostat data. Only Finland has worsened this brand. In addition, a recent OECD study warned that " important and growing proportion of poorly paid or part-time jobs explain negative evolution of wages in Spain."

German economist Carsten Brzeski points to German model — where even ten years of strong growth has not reduced number of people employed in underpaid sectors — as a reminder of what can happen "re is a great risk that wage gap is maintained or even grown, "he explains. Miguel Cardoso, of BBVA, recalls that Spain, with an unemployment rate of 15% is a case outside countries of its environment. "If started to see real wage rises, it would be indicative that companies have trouble covering vacancies. It would be bad news because it would be a structural strike rate around that 15%, which would be those without human capital necessary to integrate into labor market, "he concludes.

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