Labour Markets and Wages Policies during Economic Transition

Abstract

Abstract Arguments in favour of wage controls in post-communist economies have changed considerably since the issue was first addressed in the late 1980s (Chapters 2 and 3). Then it was suggested that Latin American experience showed that wage controls were necessary during stabilization (Fischer, 1988). Two kinds of argument were put forward: the first centring on the danger of increases in the real wage upon stabilization (discussed in Section 2), the second on controls (both wage and price) as a mechanism for coordinating expectations (Section 3). Indeed, it was believed that if such controls were combined with the fixing of the exchange rate, balancing the budget and bringing monetary emission under control, then ‘virtually cost less stabilization is possible’.