wage setter

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any economic condition or variable that serves to set wage rates

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The problem confronting the wage setters is to determine the degree of wage indexation taking into account the policy implemented by the central bank.
In contrast, Duca and VanHoose [1991] provide a multisector theory in which individual wage setters index both to a consumer price index and to sectorial firm profits, so that the extent of CPI indexation could be lower as a result of a trade-off between indexing with respect to the different variables.
In period one, the pre-election period, the wage setters negotiate their nominal wage contracts, [E.sub.0][p.sub.1].
Wage setters sign contracts prior to the start of the period based on the inflation rate they expect the central bank to choose in the ensuing time period.
In particular the behaviour of wage setters in italy appears to have been different in the 1980s, and institutional changes appear to have been associated with structural changes in the behaviour of labour markets.
Howard Archer, chief economist at Global Insight, said: "Sustained, heightened inflation expectations would be liable to adversely affect the behaviour of price and wage setters, thereby increasing the risk of a very damaging price-wage spiral developing.
"With the latest headline inflation data showing price increases stable at 4.1 per cent, wage setters are battling conflicting pressures of high inflation and low economic expectations.
Under centralised wage setting, the monetary regime affects the trade-off between consumer real wages and employment and profits faced by the wage setters. Thus, in contrast to the standard view, the monetary regime affects the outcome of the wage negotiations, and consequently also the equilibrium level of unemployment.
Nor is there any reason to expect systematic monetary policy to reduce the actual rate of unemployment below the equilibrium one--which might possibly also reduce the equilibrium rate over time via hysteresis (persistence) mechanisms--because a decision to pursue such a policy would get built into wage setters' expectations if these are rational.
Alesina (1987) and Alesina and Sachs (1988) were the first to formulate the theory of partisan preferences within a rational expectations framework with forward-looking, optimizing agents.(2) Their rational partisan theory (RPT) features the idea that the economy exhibits postelection output cycles when nominal wage contracts are signed before elections because wage setters hedge against the possible election outcomes.
In the discretionary equilibrium, wage setters not only form rational expectations of the future price level, but also choose an optimal degree of wage indexation.
"The Bank remains particularly concerned that a near-term sharp spike up in inflation will lift inflation expectations and affect the medium-term behaviour of price and wage setters," he said.
The committee is particularly concerned that current elevated inflation levels - primarily resulting from higher utility and food prices, as well as a markedly weaker pound-could lift inflation expectations and there by have significant second round effects through affecting the behaviour of price and wage setters.
'As headline inflation is still the favoured benchmark for wage setters the rise seen at the end of last year will put pressure on employers to implement higher pay awards at the beginning of this year'.
He said, "The Bank of England remains particularly concerned that a near-term sharp spike up in inflation resulting from higher energy, food and import prices will lift inflation expectations and affect the medium-term behaviour of price and wage setters.