The number of hours you spend at work affects how much you earn. Banal? Only in appearance. We are not talking about the expected difference between the paychecks of part-time and full-time jobs, but about the possible explanation for one of the most unexpected (and thorny) macroeconomic problems of recent years.
Let's start from the beginning. In the Eurozone the unemployment rate it has now been falling since the second half of 2013, but this phenomenon is not accompanied by an adequate response wage growth, which remains modest. The question is old and is often mentioned by the president of the ECB, Mario Draghi.
On several occasions, the head of Eurotower has called into question the anomalous trend in wages to explain the unexpected difficulty with which inflation rises. Workers earn less than they should, consequently – it is inevitable – they spend less. This ballast weighs on price dynamics, still far from the ECB's target of a rate "lower but close to 2%" despite the powerful monetary stimuli put in place by the European Central Bank itself (in December, according to initial estimates, annual inflation fell to 1,4. XNUMX%).
Already last spring, Draghi had underlined how “an important source of the weakness of inflation underlying was the weak domestic inflationary pressure, due in part to the modest wage growth".
But what is the mechanism behind all this? How can we explain the asymmetry between the trend of unemployment and that of wages? Last December 28, the Bank of Italy published a study titled “Wage dynamics in the euro area: what prospects?”, edited by Guido Bulligan, Elisa Guglielminetti and Eliana Viviano, in which he tries to give an answer.
According to Via Nazionale analysts, the indicator to point the finger at is “the intensive margin of the use of the labor factor”, i.e. the number of hours worked, which would play “an important role in wage growth”.
To understand why, we need to refer to the "Phillips curve”, which graphically represents the inverse relationship between the inflation rate and the unemployment rate. In other words, the fact that when unemployment rises the price level falls, and (in theory) vice versa.
Well, Bank of Italy's estimates “indicate that the slope of the Phillips curve is reducing as the number of hours per worker decreases, so that the unemployment rate has a smaller impact on wage growth".
But “companies do not actively intervene on the intensive margin in all of the Eurozone – continues the study – Among the countries examined, there were frequent changes to the intensive margin only in Germany, Italy e Holland. In these countries, the estimates linked to the Phillips curve improve significantly as the hours worked per capita vary. Our results may also explain the flattening of the Phillips curve observed over the past two years."
In perspective, therefore, "a significant increase in the intensive margin it seems fundamental why wages start to grow again in a sustained way”, says Bankitalia.
Read Alessandro Fugnoli's analysis: “Wage and employment, the Phillips curve no longer works".
Read also "Legal minimum wage: is 9-10 euros an hour the right threshold?".
