Wages problematics since the 19301950 s Elements of

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Wages problematics since the 19301950 s Elements of comparison between Europe and Latin-America Michel-Pierre

Wages problematics since the 19301950 s Elements of comparison between Europe and Latin-America Michel-Pierre Chelini Professor for Economic History University of Artois/Arras (N-France) Montevideo Conference 31. 10. 2017

Plan of presentation • 1. Wage evolution from 1950 s through today • 2.

Plan of presentation • 1. Wage evolution from 1950 s through today • 2. Wage dispersion • 3. Wage policy

1. An evolution in two periods: rapid wage growth until 1980, slower from 1980

1. An evolution in two periods: rapid wage growth until 1980, slower from 1980 through today France yearly annual net wage 1951 -2010

One century of French annual constant wage (average) in constant euros 2009

One century of French annual constant wage (average) in constant euros 2009

Three distinctive periods in French wage increase 1913 - 2000

Three distinctive periods in French wage increase 1913 - 2000

Wage share in France 1950 -2000 (Total payroll/GDP %)

Wage share in France 1950 -2000 (Total payroll/GDP %)

This development is the opposite of that of unemployment: low unemployment, sharp rise in

This development is the opposite of that of unemployment: low unemployment, sharp rise in wages (and vice versa)

On the other hand, it is parallel to GDP, which is logical: the company

On the other hand, it is parallel to GDP, which is logical: the company can not redistribute less than value added + profits, investments, etc. France, net annual constant wage/GDP 12. 0 10. 0 8. 0 6. 0 4. 0 Wages 2. 0 GDP -4. 0 -6. 0 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 1969 1967 1965 1963 1961 1959 1957 1955 1953 -2. 0 1951 0. 0

Net annual constant wage and productivity, France 1951 -2000 Chart Title 12. 0 10.

Net annual constant wage and productivity, France 1951 -2000 Chart Title 12. 0 10. 0 8. 0 6. 0 4. 0 2. 0 0. 0 -2. 0 1951195319551957195919611963196519671969197119731975197719791981198319851987198919911993199519971999 -4. 0 -6. 0 Net annual wage Productivity (GDP/worked hour)

Hourly labour cost and productivity, France 1951 -2000 Chart Title 9 8 7 6

Hourly labour cost and productivity, France 1951 -2000 Chart Title 9 8 7 6 5 4 3 2 1 0 -1 1951195319551957195919611963196519671969197119731975197719791981198319851987198919911993199519971999 Cost of labour per hour Productivity (GDP/worked hour)

The price-wage link exists, but with a sharp decline in 1973 -86 France, net

The price-wage link exists, but with a sharp decline in 1973 -86 France, net annual constant wage/inflation

Since 2000, wages are increasing rapidly in Asia, but slowly in developed countries (and

Since 2000, wages are increasing rapidly in Asia, but slowly in developed countries (and in Middle East) Wage levels reached in 2011 (100 = 2000) 250 200 150 100 50 Wage levels reached in 2011 (100 = 2000) As ia ld ca or W ar ib et C ica Af ri . . . be es tri Am er La t in an ce d Ad v M id co dl un e- Ea st 0

Since 1995, global wages evolve around 2% per year and GDP of around 4%

Since 1995, global wages evolve around 2% per year and GDP of around 4% • World GDP : 3. 5 to 3. 8% per year • Average wages : 2% • Advanced countries : 1% • Emerging countries : 3 to 5% (heterogeneity) • China : between 5 and 8% • India and Brazil : around 3% • ILO Global Wage Reports, passim (2008 -2015)

2. Wage dispersion • Dispersion: arithmetic distribution of values relative to the average •

2. Wage dispersion • Dispersion: arithmetic distribution of values relative to the average • Difference : gap between two or more things (/people, values) to distinguish them (/nature, quantity, quality, potentiality) • Disparities: deemed disproportionate distribution by a given society • Inequalities: (sociology) Difference in access to scarce and valued social resources (education, power, culture, capital, income)

Typology of wage gaps in the French case since 1951 Type of gap 195051

Typology of wage gaps in the French case since 1951 Type of gap 195051 Inter- decile D 9/D 1 3, 4 Executive / unskilled w. 3, 32 seniors (61 -65) / juniors 1, 52 (21 - 25) Men/women 1, 54 Paris region / Limousin NA Energy /industry sector NA 1967 1983 2000 1950 -2000 4, 1 4, 53 1, 50 3, 1 3, 05 1, 78 3, 1 2, 63 - 9% -22% +73% 1, 54 1, 66 1, 28 1, 35 1, 38 1, 36 1, 22 1, 46 1, 39 -21% -12% +8, 5% >1000 employees / <10 employees companies NA 1, 42 1, 38 -3% NA

Europe in general maintains a high standard of living: GDP per capita PPP 2015

Europe in general maintains a high standard of living: GDP per capita PPP 2015

But with significant differences between states and even between regions (2016, GDP/capita PPP)

But with significant differences between states and even between regions (2016, GDP/capita PPP)

Geographic dispersion of average wage inside European Union 2012: extreme gap 1 to 5,

Geographic dispersion of average wage inside European Union 2012: extreme gap 1 to 5, standard deviation/average 1, 5 main groups of countries by average wage level (annual gross salary )

A quite low inter-deciles ratio in comparison with other continents (Here D 9/D 1

A quite low inter-deciles ratio in comparison with other continents (Here D 9/D 1 since 1995) Interdecile ratio D 9/D 1 16 14 12 10 8 Interdecile ratio D 9/D 1 6 4 2 0 Germany, France UK USA Philippinas Latin America Indonesia

A low Gini coefficient of income (including wages) since 1950, Europe has been around

A low Gini coefficient of income (including wages) since 1950, Europe has been around 25 -35 since 1950

Filling the gender wage gap: high in 1950, gradually filled between 1965 and 2000,

Filling the gender wage gap: high in 1950, gradually filled between 1965 and 2000, stable (20%) since 2000. France 1950 -2010 Ratio female wage / male wage (average) 90. 0 80. 0 70. 0 60. 0 50. 0 Ratio female wage / male wage (average) 40. 0 30. 0 20. 0 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 0. 0

The residual gender wage gap is explained by a difference of qualification (France gender

The residual gender wage gap is explained by a difference of qualification (France gender workforce distribution in 1952, left, in 1995, right)

Junior/senior, three kind of ”solutions” in Europe: age distribution of wages in 2006 Source:

Junior/senior, three kind of ”solutions” in Europe: age distribution of wages in 2006 Source: OECD 2006 live longer work longer p. 66 (male full time employees) 180 170 Netherlands Nederland Zweden United UK States US Sweden Japan 160 150 140 130 120 110 Japan 100 90 80 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64

3. Wage strategy, wage policy • State policy for officials, civils servants • State

3. Wage strategy, wage policy • State policy for officials, civils servants • State policy for minimum wage • Companies wage policies • Unions wage strategies • Individual wage strategy : qualification or entrepreneurship

Wage policy in W-Europe: since 1950, supervision and regulation. 1. Explicit wage policy •

Wage policy in W-Europe: since 1950, supervision and regulation. 1. Explicit wage policy • Encouragement of collective bargaining (branch level) • Fixing of the minimum wage, • Fixing the wages of nationalized companies (until the 1980 s) • Sometimes, a set of short-term actions such as formal recommendations for moderation or stabilization plans (French "speciality", f. example 1952, 1958, 1963) and 197479 for EEC

2. Indirectly actions on the wage bill: • fiscal policy, with remunerations of officials

2. Indirectly actions on the wage bill: • fiscal policy, with remunerations of officials and volume of public orders • customs policy or competition policy • modernization of communication infrastructure (> net job creation) • school policy, especially in 1950 -80, acting on the payroll, by the payed personnel or materials and by the qualification of the formed pupils/high school students/U. students • The social insurance system (health, family, pensions, unemployment): contributions-benefits (25% of GDP) more than the state budget (22%)

Importance of minimum wage policy (France) Chronological steps in France • 1936: first definition

Importance of minimum wage policy (France) Chronological steps in France • 1936: first definition in some sectors (steel) • 1950: legal minimum wage for all sectors (SMIG, interprofessional) indexed on price evolution • 1970: legal minimum wage indexed on economic growth (SMIC) • In Europe people think that the minimum wage is good for workers, although it remains low: it allows a formalization and institutionalization of the employment relationship

France yearly annual net average wage and minimum wage 1951 -2010

France yearly annual net average wage and minimum wage 1951 -2010

Minimum wage in France, how much people is concerned? • Average part of employees/workers

Minimum wage in France, how much people is concerned? • Average part of employees/workers payed to minimum wage: 10% (2 million people) • Average part of employees/workers in the vicinity of minimum wage : 20 to 30% • Average level of minimum wage: 40 to 50% of average wage (with evolution 1950 -2015, cf. slide 6 “salaire minimum”)

The European Union is not an economic homogeneous space: dispersion of the current minimum

The European Union is not an economic homogeneous space: dispersion of the current minimum wage (2014) out of 21 countries (8 do not have an Interprofessional minimum wage) Minimum wage 2014 Salaire minimum 2014 2500 2000 1500 1000 500 Lu xe m bo Be urg lgi Pa que ys -B Irl as an d Ro Fr e ya an um ce e. Slo Uni vé Es nie pa gn e M al te Gr Po èce rtu g Cr al oa Po tie lo gn Es e t Slo oni Ré va e qu pu bl H ie iq on ue g tc rie hè q Le ue tto Lit nie u Ro an um ie an Bu ie lga rie 0

For conclusion: in order to compare 1. Gross monthly average wage in US $

For conclusion: in order to compare 1. Gross monthly average wage in US $ PPP 2012 Raw classification in three groups Monthly average wage PPP 2012 3000 2500 2000 1500 Monthly average wage PPP 2012 1000 500 0 World average Major advanced Big emerging economies countries Developing countries (others)

2. Monthly average wage (gross) in advanced and emerging countries in U. S. $

2. Monthly average wage (gross) in advanced and emerging countries in U. S. $ PPP 2012 A significant dispersion of wages by states Monthly Salary Ph s ilip pi ne a di In Ja pa So n ut Ru h ss Af ia ric n Fe a de ra tio n Ar ge nt in a Br az il Ch in a Sin ga po re y an rm a Ge ad Ca n an ce Fr h Ko re a UK ut So US A 3500 3000 2500 2000 1500 1000 500 0

3. Global monthly average wage distribution in 2000 and 2012 (2012 PPP$). Source: BIT,

3. Global monthly average wage distribution in 2000 and 2012 (2012 PPP$). Source: BIT, GWR, 2014 -15 With a short movement to convergence?