The Central European Labour Studies Institute (CELSI) co-organized with the Institute for the Study of Labor (IZA) and National Bank of Slovakia (NBS) an international scientific conference on „European Labor Markets and the Euro Area during the Great Recession: Adjustment, Transmission, Interactions“ on October 20-21, 2014 in Bratislava, Slovakia.

The keynote speeches were given by Klaus F. Zimmermann, director of IZA and professor at Bonn University, and Jordi Galí, director of CREI and professor at Universitat Pompeu Fabra, Barcelona.

Klaus F. Zimmermann presented the successful model of the German labor market which according to him responded only very mildly to the Great Recession thanks to preceding labor market reforms. Zimmermann argued that running reforms is a long-term process; and the implementation in Germany took ten years. Zimmermann stressed that „although it is clear that there is no one-size-fits-all solution, models developed for a specific country can draw upon a number of German features.“

Jordi Galí explained that the relationship between wage flexibility and employment stability may be contrary to textbook models if the role of exchange rate regime is accounted for. According to Galí, „impact of wage adjustments on employment is smaller the more the central bank seeks to stabilize the exchange rate.“ Accordingly, wage adjustments are particularly ineffective in a currency union or in countries with fixed exchange rate.

During the conference, a new book „Labor Migration, EU Enlargement, and the Great Recession“ edited by Martin Kahanec, co-founder and scientific director of CELSI and associate professor at Central European University, and Klaus F. Zimmermann forthcoming with Springer Publishing was launched. The publication addresses some of the key topics in contemporary debate about migration in an enlarged EU, focusing on the role of the free movement of workers in attenuating asymmetric economic shocks across EU labor markets during the Great Recession.

Klaus F. Zimmerman and Alessio Brown, Director of Strategy and Research Management at IZA, presented a unique project „World of Labor“ with the main mission to provide decision-makers and stakeholders with relevant information about key questions about the functioning of labor markets and policy measures based on hard empirical evidence and to help them in formulating good policies and best practices.

In the session „Wage Setting and Price-Wage Interactions,“ Piotr Lewandowski (Institute for Structural Research) found that labor market outcomes vary across the studied European countries, but differences in the relative importance of wage and employment adjustments distinguishes Germany from the rest. Gaetano D'Adamo (University of Valencia) discussed the role of institutions in explaining wage determination in the Euro area.

Andrea Raffo (Federal Reserve Board) analyzed differences across OECD countries in terms of the relative volatility of hours worked compared to output and the relative volatility of labor supply along the intensive and extensive margins. Christian Merkl (IZA) showed in a case study about Germany how short-time work saved jobs during the crisis.

Michal Rubaszek (National Bank of Poland) talked about how the duality rate increased the reaction of unemployment to output fluctuations and at the same time decreased unemployment persistence. Lien Laureys (Bank of England) analyzed how human capital depreciation during unemployment affected the short-term trade-off between unemployment/ and inflation.

Andreas Wörgötter (OECD) provided fruitful insights from small Euro Area labor markets; Zuzana Siebertova, Slovak Council for Budget Policy, analyzed marginal labor supply elasticities in Slovakia.

Benedicta Marzinotto (University of Udine) explained that EMU has exercised a disciplining effect on the countries and sectors where there is a relative high share of workers endowed with specific skills. Gregory Verdugo (Banque de France) argued that it is important for the Euro zone to avoid deflationary pressures during periods in which wages have to be adjusted. The analysis of Ronald Bachmann (RWI) showed that more transitions from employment to unemployment were the main factor behind the rise in unemployment at the early phase of the crisis.

Robert Beyer (Goethe University) highlighted that the adjustment process through cross-border worker mobility in Europe is different from the US due to differences in language, cultural factors and institutional differences. Patrick Puhani (Leibniz University of Hannover) added that migration in Europe has reacted strongly to changes in labor market conditions during the crisis.

Martin Kahanec, scientific co-organizer of the conference, commented: “This conference provided a significant impetus to our understanding of the links between macroeconomic policies in the EU and labor market adjustment. Macroeconomic policies affect labor markets in Europe; at the same time, labor market adjustment is of key importance not only for daily operations of central banks but also for the capacity of European economies to adjust to economic shocks, and for the resilience of the Euro Area during economic turbulences.”

All the conference papers are available online: http://www.iza.org/conference_files/EuroLaborMarkets_2014/viewProgram?conf_id=2646.

See the conference pictures on our Facebook page: https://www.facebook.com/media/set/?set=a.873214299356455.1073741828.263860753625149&type=3