On Jan 8, 2009, at 12:04 PM, SA wrote:
> I find that argument bullshit, especially because of the particular
> developed countries in the sample: Sweden and Finland both have
> highly centralized wage bargaining systems.
Evidence on that is mixed. IMF stats on average wages in mfg (all that's available) for the five years before and after the crisis hit:
real nominal CPI
---- ------- ---
Finland Sweden Finland Sweden Finland Sweden 1986-91 2.7% 0.8 8.1 8.1 5.2 7.2 1991-96 1.2 2.3 2.6 4.8 1.5 2.4 change -1.6 +1.5 -5.4 -3.2 -3.7 -4.8
So, there was a downward adjustment in nominal wage growth, but inflation fell dramatically, so Swedish wage growth accelerated after the crisis and Finland's declined.
In any case, it's not just about wages - it's about the welfare state. I doubt the reservation wage is lower in Scandinavia than it is in Thailand or Korea. It's less damaging to be unemployed in a welfare state than in a dog-eat-dog state.
Doug