Wage setting in Slovenia: interpretation of the Wage Dynamics Network (WDN) survey findings in an institutional and macroeconomic context

Biswajit Banerjee,Urban Sila,Matija Vodopivec

doi:10.1186/2193-9012-2-9

Abstract

This paper examines responses to questions on wage setting features in Slovenia’s Wage Dynamics Network (WDN) survey in the institutional and macroeconomic context of the Slovene economy. The question on collective wage agreement did not capture the prevailing institutional arrangement of multi-level agreements, and the responses on wage indexation were seemingly at odds with institutional features of wage setting. Labor cost adjustments during the financial crisis were primarily in variable pay components and employment but not in base wages. Minimum wage policy contributed to downward wage rigidity.

Highlights

Labor market institutions and wage setting mechanisms in euro area countries have recently received considerable attention from the European System of Central Banks (Eurosystem)
This paper provides a description of wage setting institutions in Slovenia, places the labor market outcomes in a broader macroeconomic context, and presents selected results of the 2008 firm-level Wage Dynamics Network (WDN) survey
The survey was conducted at a time when the economy was booming and Slovenia had not experienced a downturn in the business cycle during the preceding decade

Summary

Introduction

Labor market institutions and wage setting mechanisms in euro area countries have recently received considerable attention from the European System of Central Banks (Eurosystem). A proper understanding of the features of labor market and wage rigidities is essential for designing appropriate structural policies that will facilitate adjustment to shocks. With these considerations in mind, the Eurosystem established the Wage Dynamics Network (WDN) research group in July 2006 to conduct an in-depth study of the sources and features of wage and labor cost dynamics, and of the relationship between wages, labor costs and prices both at the firm and macroeconomic level. A third follow-up WDN survey was conducted during the summer of 2009 in a sample of 10 countries to examine firms’ perception of the financial crisis and their actual responses to it

Objectives

Findings

Conclusion