Risks of colossal wage growth : policy puzzle no.1

Abstract

Wages largely depend on productivity and directly reflect an economy’s income capacity. A prominent measure of wage growth is labour compensation per hour worked. Macroeconomic foundations including GDP growth, competitiveness, and consolidated public finances as well as productivity are vital for sustainable and “risk-free” wage growth. In 2018, Romania – one of the fastest-growing economies in the EU – experienced sizeable wage growth of 16.28%. The increase in labour productivity did not follow the pace of wage growth.