Wage Policy
In configuring this scenario of integrated industrial and innovation policy, the role of wage determination is crucial and is part of the other two actions. The rationale of wage fixing should escape the old maxim “greater effort and greater flexibility” and should point to a new dynamic to favor growth.
This can be achieved by combining innovation and participation. Starting from a situation characterized by the existence of a two-layer bargaining system—central (national level) and decentralized (e.g., firm level or territorial level) levels—we recognize the importance of renewing the role of national-level bargaining: at this level, wage increases are bargained to preserve purchasing power, but at this contractual level the objective of increasing competitiveness and productivity must also be established. Higher wages should be part of national bargaining and not residually left just to the firm level. Then the social parties and the government must adopt specific measures in order to reach the targeted productivity growth: technological and organizational innovation, investment in physical and intangible capital, use of public resources to spur R&D, public and private investment to increase human capital, reduction of labor taxation (e.g., reduction of the tax wedge), reduction of tax evasion and so on. The second-level bargaining, that at a decentralized level, has the function of employing specific measures to reach the productivity goals, since the wage increases accordingly, besides the systemic and connective interventions mentioned above. At this level the adoption of a pay for participation model (Cainelli et al., 2002) would imply that increases in wages are linked to organizational changes and to the commitment of managers and workers (and the union representatives) to concentrate on technological innovation, product and process innovation, information and communications technology (ICT) development, the empowerment of human capital and environmental innovations among other potential interventions. A model of pay for participation is strictly linked to organizational changes, as noted above, and it relates to innovation policies, both because it is spurred by employeeempowering organizational innovations and because it can generate the incentives to innovate in several spheres. This proposal of linking wages and productivity, also through appropriate innovation policies, has the considerable advantage of reducing the aberrant separation between productivity and real wages that several European economies have experienced in the last decade and that contribute to reducing the labor income share, depressing the aggregate demand through the compression of consumption (Janssen, 2013, 2014). The way to follow would be that of a “golden rule for wages” in which real wages increase at the same pace of productivity. On this point we think that a part of labor policy coordination among Eurozone countries would be an agreement on the wage movement in each country in accordance to its internal and external imbalances. In particular, those countries showing large and positive surpluses in the trade balance and fast productivity growth should increase real wages at a faster pace than productivity. The joint internal consumption and unit labor cost increases both contribute to reducing the surplus in the trade balance. At the same time, countries with slow productivity growth and a trade balance with trade deficits should use the real wage dynamic as an instrument to increase productivity and to gain competitiveness in foreign markets. The latter two must be achieved through innovation rather than with a mere wage reduction, setting the real wage dynamic on the basis of productivity goals, which are in turn fixed at the national level of bargaining, with the involvement and “concertation” of the social parties and the government, as reminded above (Watt, 2007, 2010, 2012; Brancaccio, 2012; Pini, 2013e).None of the structural reforms imposed on several European peripheral countries go in this direction, and a policy is needed to sustain growth and counterbalance the current unsustainable imbalances in the Eurozone. On the contrary, as repeatedly said by many economists, they are going in the wrong direction because fiscal consolidation does nothing more than depress aggregate demand, increase unemployment, slow down the wage dynamic and so on in a vicious circle.
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