The Slowdown in Wage Inflation since 1985

Since the middle of the eighties wage inflation has slowed down in Austria. The wage setting process during this period was heavily influenced by economic factors that affected only some enterprises or sectors. In contrast to other countries the wage leadership of the sectors concerned (nationalized industries, public sector) was so strong that the difficulties they experienced (or in the case of the public sector the attempt to reduce the federal budget deficit) also dampened wage growth in other sectors. A comparison of the increase in contractual wages and in earning across some major industries reveals that this pressure on wages was transmitted to other sectors in an even intensified form. Thus, wage differentials between industries have risen rather than narrowed.