2010
Discussion of:
Labour markets during recessions – evidence on the role of wage rigidity and
hysteresis
by Juha Kilponen, David Lodge, Rolf Strauch and Juuso Vanhala
Steinar HoldenDepartment of Economics, University of Oslo
http://folk.uio.no/sholden/Workshop in Sveriges Riksbank
2 September 2010
2010
Research questions
How does the labour market react during financial crises and other downturns?
Are labour market reactions to financial crises systematically different from normal downturns?
Unemployment, employment and outputHysteresis and long-term unemployment
Wages and wage rigidityEmployment and output effects
2010
Overall evaluation
Lots of interesting charts and empirical analyses
Cover a broad range of important issues Provides a useful overview of labour
market reactions in downturns
Does not ”dig deep” on any specific issueOften low statistical significanceLittle analysis of heterogeneity and mechanisms
2010
Business cycle dating
”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
2010
Business cycle dating
”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
2010
Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
2
4
6
8
10
12
14
16
18
FinlandNorwaySweden
2010
Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
2
4
6
8
10
12
14
16
18
FinlandNorwaySweden
2010
Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
2
4
6
8
10
12
14
16
18
FinlandNorwaySweden
2010
Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
2
4
6
8
10
12
14
16
18
FinlandNorwaySweden
2010
Productivity growth reduces cost – but not this time (?)
2010
2010
2010
2010
2010
Wage equation
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Wage equation
No wage share term – in contrast to theory and to a wealth of evidence on time series and panel data
Blanchflower & Oswald (1994), Nymoen & Rødseth (2003), Holden & Nymoen (2002), Forslund, Gottfries & Westermark (2008), Bårdsen & Nymoen (2009) ……….
2010
2010
2010
Surprising that employment is not found to affect compensation – in contrast to most empirical studies
2010
”Compensation shocks lower employment growth, but regarding output and prices, the demand effect from higher wages seems to prevail and push up both.”
2010
• Confidence bands in crises
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• Confidence bands in crises• “The impact on nominal growth rates however exceeds the output
effect. As a result, employment growth drops remarkably and eventually turns negative. “
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• Real compensation (?) and unemployment – two changes at the same time make it hard to interpret the results• How to interpret effect on unemployment?
2010
2010
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“At the same time, note that there are several
countries where the real product wage had fallen
below 2008Q1 level already prior to 2009Q1. This is
in contrast to the ERM II crisis, where the real wage
shows far more inertia. In fact, the real wage shows
a countercyclical pattern in the large majority of the
countries during the ERM II crisis. This leads us to
conjecture that nominal wage inertia is less
prevalent during the current crisis.”
2010
Producer prices - annual growth rates
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
q2
-6
-4
-2
0
2
4
6
8
10
United States 1EU27 total 2OECD total
2010
Labour compensation – annual growth rates
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0
1
2
3
4
5
6
7
8
United StatesEU27 totalOECD totalEuro area
2010Other evidence suggest that downward nominal wage rigidity is weaker
(Holden & Wulfsberg, 2010)
2010
2010
2010
2010
Summing up
Lots of interesting charts and empirical analyses
Cover a broad range of important issues Provides a useful overview of labour
market reactions in downturns
Does not ”dig deep” on any specific issueOften low statistical significanceLittle analysis of heterogeneity and mechanisms
2010
