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Greater even than the uneven distribution of wage rates in the Eurozone, is surely the uneven distribution of employment per se. It should be politically much easier for Eurozone political parties to support "equal pay for equal work", than equalised social welfare systems which could only exist by direct subvention of Greek etc, government coffers from German government coffers etc.

If there is one market failure in the Eurozone at the moment, it is surely the labour market failure of jobs failing to migrate to where unemployment is highest and where wage rates are also much lower.  Indeed high unemployment correlates with low wage rates - the reverse of what classical economics would predict. The single market has failed to produce the capital flows and investment patterns from high wage to low wage economies that should have tended to equalise unemployment rates by now.

It should be easier to persuade German Capitalists to invest in low wage economies than to persuade German voters to support Greek "subsidies" at their own expense, or even to support EU wide industrial/agricultural/energy and transport policies which favour net transfers/investments in low employment/wage economies. But in stead of mass capital flows from high cost to low cost economies we have mass people migrations from low employment to high employment economies. Why is it that "people" are showing more "flexibility" and mobility than capital?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Aug 31st, 2013 at 07:12:56 AM EST
Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com
I would say, by the way, that while our skepticism has been pretty well vindicated, the key weaknesses of Europe as a currency area have been somewhat different from what we imagined. Low labor mobility is a problem; but lack of fiscal integration and lack of banking union have been even bigger problems.


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Aug 31st, 2013 at 07:19:22 AM EST
[ Parent ]
Might it be because banking is a blind spot for Krugman and the rest of the neoclassicals?

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sat Aug 31st, 2013 at 10:09:30 AM EST
[ Parent ]
Resolutely so. Acknowledging the reality of MMT seems tantamount to heresy.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 4th, 2013 at 01:59:36 PM EST
[ Parent ]
Of course low wages are correlated with high unemployment.  Workers are paid whatever they can demand, and their ability to demand is in direct proportion to their political strength in government and their economic strength at the bargaining table.  High unemployment destroys theat bargaining power, and lets employers pay less for what work they choose to make available.
by Zwackus on Sun Sep 1st, 2013 at 12:32:09 AM EST
[ Parent ]

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