Abhatoo - Centre Nationale de Documentation

As a consequence of government responses to the economic crisis, aimed at restabilising financial markets, maintaining employment and mitigating the effects of unemployment, public budgets have come increasingly under strain. The debt crisis that shook the Euro area in spring this year, and is far from having been surmounted, has prompted governments to embark on a policy of strict budgetary austerity. All over Europe the public sectors have been the main target of governments’ consolidation policies. Public sector employers have bypassed established collective bargaining procedures and wages and jobs have been cut or frozen, most frequently by unilateral state decision.

Against the background of governments’ consolidation strategies, this paper provides an overview of recent developments in terms of wages, job cuts and reforms of the pay system in the public sector, viewing these recent developments and strategies in the light of mid-term, i.e. pre-crisis, public sector employment and wage developments. It is argued that one-sided expenditure cuts that focus primarily on reducing the public sector wage bill, without considering the revenue side of public finances, endanger a sustainable recovery in Europe. What is more, cuts and freezes of public sector wages imposed unilaterally by the state adversely affect the bargaining power of unions in the private sectors, resulting in increasing pressure for wage restraint. For this reason, the re-establishment of collective bargaining as a mechanism to settle public sector pay is of vital importance in order to prevent downward pressures on wages, maintain workers’ purchasing power and contribute to a stable and balanced economic development within the Eurozone and across the business cycle.