Wage Misalignment in Cfa Countries: Are Labor Market Policies to Blame?

60 Pages Posted: 20 Apr 2016

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 1998

Abstract

It seems natural to attribute to wage rigidity (stemming from highly distortionary labor policies) the over-valuation of the CFA (Communaute Financiere Africaine) franc after the negative external shocks of the 1980s. Using a variety of data sources, the author assesses the actual rigidity of wages in CFA countries and the relationship of wage rigidity to labor policies. He shows that: a) Workers' wages are higher in CFA countries than in similar countries outside the CFA zone and higher than the earnings of similar self-employed workers within the same countries. b) Real wages are rigid (in the sense of closely following fluctuations in governmental wages and consumer prices) but there is no evidence of nominal wage rigidity. c) Labor policies may not be the source of wage misalignment and real rigidity. When compared internationally, minimum wages in CFA countries are not high enough to account for the observed wage misalignment, and their adjustment over time has been responsive to real shocks. d) Unions in the private sector seem to have been more instrumental in creating wage moderation than in creating wage drift in CFA countries. Their members usually get lower wages than similar nonunionized workers, probably because of the subordinate nature of the labor movement in CFA countries. e) Government pay policies and (possibly) limited competition in product markets are the most probable causes of wage misalignment and real wage rigidity in CFA countries.

Keywords: Banks & Banking Reform, Health Economics & Finance, Environmental Economics & Policies, Labor Policies, Economic Theory & Research, Municipal Financial Management

Suggested Citation

Rama, Martin, Wage Misalignment in Cfa Countries: Are Labor Market Policies to Blame? (January 31, 1998). World Bank Policy Research Working Paper No. 1873. Available at SSRN: https://ssrn.com/abstract=2660564

Martin Rama (Contact Author)

World Bank ( email )

1818 H. Street, N.W.
Washington, DC 20433
United States

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