Nominal wage changes in the eurozone

This is a fascinating picture:

The link and further discussion is here.

Comments

Spare in der Zeit, so hast du in der Not.

And what you have, others take.

No wonder why many ordinary Germans may feel like the ants compared to the Mediterranean grasshoppers, and that they've taken their medicine already, before the crisis.

Nope - ordinary Germans already knew what was going on. And so far, the winning parties in the political process have been for further euro integration, not less.

What is interesting is how (northern) Italians feel about bailing out other countries, at least the ones I talked to a couple of months ago in Umbria - they are really opposed to having their hard earned money go to bail outs. The chart above may give an indication of why the Italians feel this way.

I will just say that my German friends sound like your Italian ones, but simply feel that they have good options.

Well, a look at retirement ages and government pensions is also interesting - Germany stands out on that one too.

And of course, Germany continues to elect Green politicians - the latest being the mayor of Stuttgart, ending 3 decades of CDU rule.

The Greens are also very serious about cutting debt, at least where they are in charge of state government.

Germany stands out in a number of ways - shame so much of what makes Germany work has been lost in the U.S. Including a robust industrial base with a workforce able to accept sacrifice for long turn gain, and equally able to demand getting its fair share after the sacrifices begin to pay off. It is reasonable to assume that real wages will continue to rise - after all, in this Green governed Bundesland, unemployment is still under 4% (by the German definition - anyone working 15 hours or less who wishes to work full time is counted as 'unemployed').

You don't feel that the Greens are being elected precisely because they are out of power at the federal level, regardless of their stated foreign policy? It has happened everywhere else in Europe.

+23% followed by -19% sounds like a better deal than -18% followed by +2%........

Except that Greece isn't done yet - they are planning to cut mandatory severance pay in half, and re-implement a 6 day work week. (Which made lead to further political turmoil on a major scale.)

No one wants the Greek deal - especially the Greeks. Which is a major part of the whole situation in that regard. The Germans are quite content with how things have worked out, till now. But then, this is a country Walmart left, unable to make any money due to the fact that it was not as low cost or efficient as its competitors. German real wages are quite likely to increase in the near future - employers are having a hard time finding qualified workers.

German retail efficient? Did they fully repeal the laws about opening hours and restrictions on sales and everything else designed to help small shopkeepers?

Perhaps they did. I thought Walmart had the problem of not being used to dealing with unions, very much easier to organize there.

> Except that Greece isn’t done yet – they are planning to cut mandatory severance pay in half

I take this to mean that you must feel strongly that things will improve for Greece's economy, given such planning?

Strange also that German retailers haven't done well in the US. I suspect that it is more mutual cultural problems preventing both from flourishing in the other country, rather than the workforce or retailer efficiency you tout.

I have been in an Aldi, and would never want to shop there.

Trader Joe's does pretty well.

Nice anecdata, but maybe try some actual http://www.forbes.com/sites/retailwire/2011/04/05/does-discount-grocer-aldi-have-the-upper-hand-in-urban-growth/ http://www.pressherald.com/business/Trader-Joes-rapid-growth-imperils-cozy-feel-.html http://www.forbes.com/sites/glennllopis/2011/09/05/why-trader-joes-stands-out-from-all-the-rest-in-the-grocery-business/

The German number is a little misleading because in the time period they expanding their workforce with a lot of people who had previously been receiving government welfare. The added low income jobs lowered the average compensation. The median German worker did not experience a 18% fall.

I realize this isn't original, but I blame the Jews.

The Germans surely resent bailing out other countries while THEY have been so virtuous. Somebody should explain to them that the bail-outs have to happen BECAUSE they have been "virtuous". But once you start that way, you're on the slippery slope to explaining that it was a stupid policy from day one, that their politicians, economists and especially central bankers are a bunch of incompetent liars, etc, etc.

This is a bit misleading: Germany losing nominal compensation per employee relative to the European average is to be expected because they are quite a bit above average. If that average is growing faster than German wages, then this is what you would observe and that is broadly one of the goals of the EU: convergence in nominal incomes across the eurozone and the overall EU. So while I do know the Germans have had stagnant wages for quite some time, that cannot really be inferred by this picture and, arguably, they are in a better place than they were in 2000 in absolute terms.

Despite the focus on Greece and Germany, the real story here is Portugal: a peripheral country, the poorest of the initial group of members in the eurozone, and the only country (Greece lost very little in nominal terms, so it basically moved along with the average for the entire 2000-2012 period) to have lost ground to the european average. That is pretty shocking, and it would make the Portuguese, not the Germans or Greeks, those with the most compelling reasons to be resentful of the euro project.

It would be interesting to see the corresponding absolute average nominal wage per capita, for those countries. 'Balance' on this plot only means that we go back to the situation of 2000, which wasn't necessarily heaven, was it? Germany was just starting to climb out of its 'sick man of Europe' state (the unification-aftermath), with Harz-4 austerity on wages.

A few strange statistical quirks make the above numbers a strange measure of the growth/pain that these countries had to enjoy/bear:
- comparing to the european average has funny effects. If the average goes up enough, everybody profits. That was probably more true in 2000-2009 than in 2009-2012, when the average didn't do very well. That means that the recent outliers are more extreme in the adaptations they had to make.
- it doesn't make sense to compare total change of 2000-2009 (9 years) to that of 2009-2012 (3 years). The grey bars should be shrunk by a factor 3 relative to the dark blue ones of recent years.

.. I think these two effects might make nonsense of the first impression one gets from the above graph. And Germans probably have little reason to think they underwent austerity anything compared to what is happening now in the EU periphery.

I was similarly suspicious about the "relative to European average" part.

Why not just present the change as is? Wonder how that graph would look like.

Nice optic illusion also. Or it's just me that sees the 0% line not straight?

Ha. I'm not alone.

You can try to put a paper on your monitor, and not be fooled.

I was annoyed that I can't make my pointer move right with the keyboard arrow key....

Ah, Scott Sumner pointed out something I should have noticed. This is about chance in nominal total compensation per employee, not hourly compensation. So these money amounts can also be accompanied by people working more or less. Some of the decline, as in pre-crisis Germany, may be from people accepting fewer hours. At least they get leisure that way.

As someone else has partially pointed out, this is a chart of relative changes. Add to that observation the fact that these are nominal changes in wages, rather than real changes. Second, the chart uses two different time measurements, from 2000 to 2009, and then from 2009 to 2012. If you were to plot the average rate of change over these two periods, rather than the cumulative change, the chart would be significantly different.

Living in Germany, I can most certainly add to the conversation that German wages did not sink by 18%, but rather were fairly stagnant, the result of a deal cut between workers' unions and company owners, where slow wage growth was compensated for by a commitment to keep workers hired (with flexibility about where they were working for many jobs). The sharp increase in wages in Greece and Ireland are the reason why German wages appear to shrink: they didn't. What really happened is that other countries started paying, in the wake of their economic boom driven by the real estate bubble, wages far in excess of long-term productivity growth, and the correction of this trend is what has driven wages down, relatively speaking, in those countries.

I find the chart to be severely misleading due to the fact that it is poorly done, comparing cumulative changes over two different time periods rather than average changes during those time periods, and the use of relative changes against a benchmark that is literally inflated (as it is nominal rather than real). A good example of an author trying to make a point not with the data he has, but with the data manipulated to show what he wants...

You can earn a living or you can live on the cost of others. Yet only one of these options is sustainable in the long run.

The longer our politicians ignore the fact that we need to size down, the harder the fall will be. Before we will see the situation getting better, it will have to get worse a lot. Sad, but inevitable.

Wasn't that 18% fall in Germany due to the integration of East Germany?

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