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    Labour Productivity, Wages, and Inflation: Evidence from Selected Central and South-East European Countries
    (Eurasian Economists Association, 2024-01-18)
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    The relationship between inflation, worker wages, and labour productivity growth has been a widely discussed topic among academics in recent decades. Labour productivity is a critical component for maintaining and improving the competitiveness of national economies and establishing sustainable economic growth. The increase in labour productivity serves as the foundation for increasing workers' wages, thereby enhancing their purchasing power and overall well-being. However, empirical data from Southeast European countries indicate that labour productivity growth rates have been insufficient to enable catch-up with their Western European counterparts. Additionally, these countries have experienced significant inflation rates in recent years, resulting in a notable decline in real wages for workers. Therefore, the gap between labour productivity and workers' wages has not only failed to diminish but has, in fact, widened over the past few decades. The primary objective of this paper is to examine the interrelationships among labour productivity, workers' wages, and inflation in Central and Southeast European countries, specifically the Balkan EU countries, Balkan non-EU countries, and the Visegrád group of countries. The findings reveal a short-term causality among inflation, labour productivity, and the statutory minimum wage in these three groups of countries. Furthermore, there is evidence of a bidirectional causal relationship running from the minimum wage and inflation to labour productivity, and vice versa, in the short term. Additionally, the introduction of a minimum wage shock significantly influences the future values of labour productivity and inflation. The adverse effects of an externally induced increase in the statutory minimum wage are particularly noticeable in Western Balkan non-EU countries.
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    The Role of Efficiency Wages in Determining the Inter-Industry Wage Differentials: Evidence from North Macedonia
    (Faculty of Economics-Skopje, Ss. Cyril and Methodius University in Skopje, 2023-12-15)
    Nikoloski, Dimitar
    The efficiency wage theory states that the workers’ productivity depends on their wages, thus firms find beneficial to pay higher than the market clearing wages by expecting an increase in labour productivity. Hence, this alterative approach to orthodox economic theory assumes a reversed causality established between wages and labour productivity. The efficiency wage models take into account the potential influence of institutional arrangements. For instance, the ICT industry characteristics such as possibility for platform work affect wage levels and contribute to paying wage premium (exposure to the global competition). The evolution of real wages in North Macedonia over the last decade shows an outstanding inter-industry wage differentials, where Information and communication; and Finance and insurance appear as sectors with constantly high average real wages compared to the national average level. In order to explore the possible reversed causation between labour productivity and real wages, we estimate a homogeneous panel vector autoregression (VAR) model by fitting a multivariate panel regression of each dependent variable on lags of itself and on lags of other dependent variables using generalized method of moments (GMM). The results confirm the efficiency wage theory assumption since we found statistically significant impact of real wages on labour productivity and not vice-versa. This conclusion opens a wide room for justifying the policies that favour increases of real wages by tying them to increases in productivity. The identified wage premium, particularly from working in the ICT sector, suggests that the policy need to focus on stimulating widespread adoption of digital technologies across other sectors through education and training.
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    THE LINK BETWEEN PRODUCTIVITY AND LABOUR SHARE – THE CASE OF NORTH MACEDONIA AND SLOVENIA
    (Faculty of Economics-Skopje, SS. Cyril and Methodius University in Skopje, 2020-11-14)
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    Kozheski, Kristijan
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    Merdzan, Gunter
    The large divergence between productivity and workers’ incomes has been becoming a reality in most countries, not just in the United States after 1980s, where labour productivity grew faster than real wages and employment. The breakdown according to Brynjolfsson and McAfee (2014) is due to technological progress, according to Bivens and Mishel (2015) the growing inequality and according to Baker (2007) the declining labour share in GDP. The main goal of this paper is to find out if the global trend of “The Great Decoupling” between productivity and labour share is a real process in the case of the countries analyzed from the Southeast Europe region. Given that Slovenia is among the most developed countries, while North Macedonia belongs to the group of developing countries that in these stages of development rely on foreign capital and cheap labour, we examine whether the process of “The Great Decoupling” between productivity and labour share is a reality in both countries. From the analysis of the trend of the movement of the average labour productivity of these two countries, it can be concluded that in both countries there is a trajectory of the movement of the labour productivity. Also, from the trend of the movement of the share of labour income and labour productivity in the case of Slovenia and North Macedonia it can be concluded that they indicate the existence of a large gap, i.e. divergence in the trajectory of motion. Also, the gap between labour productivity and the share of labour income in GDP on the example of North Macedonia, if compared to the example of Slovenia is of lower intensity. Finally, based on the results obtained from the conducted econometric analysis, we determine whether there is a need for further research or the phenomenon is a temporary deviation in the dynamics of the gap between labour share and labour productivity.