Relationship between wages, labour productivity and unemployment rate in new EU member countries

Abstract

e main aim of this article is to nd out the extent to which relative labour productivity and relative unemployment rate changes determine relative wage changes. We use average annual macro-data for the period 2002-2013 for Poland and other 5 new EU members: Estonia, Hungary, Slovak, Czech Republic and Slovenia. Using Poland as benchmark, rst we examine the correlation between wage, productivity and unemployment rate changes in countries in question. en, using panel data model we assess the elasticities of the relative wage changes with regard to relative productivity and unemployment changes. We found out that the trajectory of wage, productivity and unemployment rate development in new EU member countries is diversi ed. We con rmed a strong relationship between wage and productivity ratio changes in Poland related to Czech Republic, Estonia and Hungary. Moreover, an increase of productivity in Poland in comparison to Czech Republic is greater than an increase of wages in Poland in comparison to Czech Republic. e same relation occurs in Slovak and Slovak Republic. At the same time the productivity in Poland in relation to Hungary and Estonia has been growing slower than the wages in Poland in comparison to Hungary and Estonia. e correlations between wage and unemployment rate ratios are of smaller signi cance.