The example of Italy is striking. The wage share (or the real unit labour costs) has barely risen over this period. Above all the development of nominal unit labour costs therefore reflects that of prices. Real unit labour costs have stagnated, for the simple reason that wages and productivity have followed a common trend of stagnation. Productivity gains have been zero, slightly negative even, likewise the average salary. The lack of productivity gains is a major economic problem but which must not be confused with a wage drift. These two problems are different and call for different solutions. Wage reductions whatever the cost, mass unemployment and more generally the economic confusion that goes together with a recession and a credit crunch only worsen the dynamics of productivity. This is what we could see in Portugal.
In Germany the decrease in real unit labour costs resulted (until 2008) from the productivity gains which were not felt in the average real wage (which only rose slightly over this period). These productivity gains were quite moderate, barely more than a total of 10% over nine years. France actually experienced a similar development in its productivity but over the same period the real average wage developed in line with productivity, which implies stable real unit labour costs. In Spain the real wage decreased over that period with stagnating productivity, resulting in a sharp drop in real unit labour costs. However the cumulative inflation of over 40% drove the nominal unit labours cost upwards. A healthy situation would comprise significant productivity gains, similar wage increases and an almost homogeneous inflation rate between the various countries of the euro zone."
Source: Foundation Robert Shuman - eu
