March 30, 2004

Wage moderation and labour productivity

Loslaten loonmatiging niet goed voor groei arbeidsproductiviteit

Press release
Lonen zijn geen geschikt aangrijpingspunt om de arbeidsproductiviteit te verhogen. Hoge lonen verhogen weliswaar de arbeidsproductiviteit op korte termijn, maar deze verhoging is tijdelijk van aard en inefficiënt. Op lange termijn is een loongolf naar verwachting zelfs schadelijk voor de arbeidsproductiviteit.

We are sorry, unfortunately there is no English translation of this page.


Peter Broer
Dick Morks

In the Dutch economic policy debate, wage moderation is widely considered as a key factor for achieving economic growth and low unemployment. However, some economists criticise the policy emphasis on wage moderation, claiming that high wages are needed to maintain structural labour productivity growth.

This paper analyses the effects of a wage push on labour productivity within the framework of endogenous technological progress, endogenous technology adoption and insufficient competition. The conclusion is that a wage push raises labour productivity in the short run. However, this rise in labour productivity is temporary and inefficient. In the long run, a wage push may well harm labour productivity.

The main message of the paper is that it is probably best not to use wage policy at all as a tool to influence productivity. As a tool against unemployment, however, it is very effective. These insights are applied in a review of the Dutch post-war productivity growth.


Peter Broer