BIS Review 38/1997  -7-  Diagram 3a  Real w ages and em ployed persons, EU and U SA, 1970-97 Index 1970=100 EU  170  USA  170  170  160  160  150  150  140  140  130  130  130  120  120  120  110  110  110  100  100  100  90  90  90  80  80  80  160  R e a l wa ges  150 140 130  E m ploy m ent  120  70  72  74  76  78  80  82  84  86  88  90  92  94  96  98  170 160 150  E m ploy m ent  140  110  R e a l wa ges  100 90 80  70  72  74  76  78  80  82  84  86  88  90  92  94  96  98  S ource : O E CD  As shown in Diagram 3a, since 1970 the average real wage in the United States has risen by a total of 15 per cent but by as much as 60 per cent in the EU area. The change in employment, as I mentioned earlier, has been the opposite.
Allow me to cite (from Finanstidningen, 14th October 1996): “There is no direct link between our coming wage claims and the number who are unemployed”. This is an illustration of the theories about insiders and outsiders in the labour market. The costs of hiring and firing labour are one source of insiders’ influence over wage formation, which can affect the possibility of bringing unemployment down. During the latest economic upswing in Sweden the number of hours worked rose by the equivalent of 130,000 new jobs but the increase in the number of persons in employment stopped at 85,000. The direct explanation is that average working time lengthened, which naturally may have reflected a rising propensity to go from part-time to full-time work and to do overtime in order to ease a strained personal economy. But it is also conceivable that employers have become less inclined to hire additional labour and more prone to make greater use of the existing labour force to cope with rising demand. An indication of this could be employers’ willingness to introduce working hours related to the activity in the economy. The differences between the explanatory models should not be exaggerated. They have several features in common and this makes them difficult to separate clearly in practice. Most of the evidence suggests that the high equilibrium unemployment in Western Europe as well as in Sweden has several causes.