Nominal wages may increase, while real wages stagnate, owing to higher inflation.

Then a decade of nominal wage growth that out paced productivity gains led to a rise in unit labor costs, real exchange rate appreciation, and large current account deficits.

But wages have grown at a far slower pace than GDP.

Currently their nominal wages are only about 7 of the West European average.

Unit labor costs reflect compensation levels and productivity gains in productivity can offset the effect of wage growth.

Wage growth, rather than borrowing and financial booms, fuelled demand growth.

And if the decline in nominal wages signals that there is an excess supply of labor, matters only get worse.

This disparity reflected some differences in productivity growth but even more so differences in wage growth.

But such adjustments cannot happen in a monetary union, so unit labor costs are slowly re converging via a protracted process of flat nominal wage growth and slowly declining real wages (a process that would be quicker with higher inflation in Germany and Northern Europe).

Moreover, wage flexibility meant that substantially slower wage growth in the states that lost industries helped to attract and retain other industries.

In the face of downward nominal wage rigidity, higher inflation would facilitate sectoral adjustment and achieve a small but useful impact on reducing debt burdens.

Yet, with high levels of unemployment likely to keep nominal wage growth relatively subdued, typical troubled households could be worse off with higher food and fuel prices cutting into disposable income.

During this long process of industrialization, wages will increase gradually, but it is very unlikely that they will grow at the same rate as labor productivity.

Productivity growth at the historical rate of 0.7 in Germany, with wage growth of 4 , would be compatible with an inflation rate a little above 3 .

A rapid reduction in unit labor costs, through structural reforms that increased productivity growth in excess of wages, is just as unlikely.

After a decade that saw wages grow faster than productivity, unit labor costs (and the real exchange rate based on those costs) appreciated sharply.

The developing world is not doing much better. As the International Labor Organization s latest Global Wage Report shows, wage gains are lagging far behind productivity growth.

Muted wage growth increases competitiveness, and underutilized labor and capital are redeployed.

The American Employment Cost index and other indicators of developed country nominal wage growth show no acceleration of change.

So the conclusion seems to be that wage growth will not threaten China s competitiveness in the next 10 or even 20 years.

The alternative is muted wage and income growth shared across the income spectrum, combined with productivity enhancing measures.

Wages have stagnated despite strong productivity growth, while the trade deficit has set new records.

Indeed, productivity growth in India s service sector matches productivity growth in China s manufacturing sector, thereby reducing poverty by enabling wages to rise.

Fourth, private consumption growth in the last few quarters does not reflect growth in real wages (which are actually falling).

The more trade unions defend existing wage structures, and the lower productivity growth is, the longer the slump will be.

One explanation for the difference is accelerating wage growth across developing regions, which is raising commodity demand, whereas stagnating wages in developed markets are causing the reserve price to decline.

Short of dropping out of the eurozone, the only real option available to Greece, Spain, and the others to boost competitiveness is to engineer a one time across the board reduction in nominal wages and prices for utilities and services.

The German solution to this conundrum keeping wage growth below that of productivity, thereby reducing unit labor costs took more than a decade to yield results.

Nor are the non poor faring particularly well, as wage growth has remained virtually flat for a very long time, even as corporate profits are booming.

Unemployment remained high, at 7.8 at the end of 2012, and there has been almost no real wage growth over the last few years.

The similarities are large trade deficits, manufacturing job loss, asset price inflation, rising debt to income ratios, and detachment of wages from productivity growth.

Average unemployment would then have to rise in order to keep workers demands for real wage increases at a level warranted by productivity growth.

This structure contrasts with the pre 1980 business cycle, which rested on wage growth tied to productivity growth and full employment.

Lastly, the division and nominal value of the shares had not been specified.

Evidence that China s wage efficiency remains high relative to other developing countries comes in the form of continued growth in inflows of foreign direct investment over the past 12 months, despite wage increases. In July, for example, FDI increased by 29.2 year on year, much higher than the global average.

The alternative is to cut the face value of Greece s debt.

Moreover, it is clear that northern European countries could help to close the competitiveness gap more rapidly by encouraging faster wage growth.

Likewise, competitiveness losses have been partly reversed as wages have lagged productivity growth, thus reducing unit labor costs, and some structural reforms are ongoing.

Most of these economies were suffering a loss of their export markets to low wage Asia. A decade of wage growth exceeding productivity gains led to real appreciation, loss of competitiveness, and large current account deficits.

Moreover, the increase in China s overall price level and wage levels in particular has caused the RMB to strengthen steadily in real terms, reducing (to a certain extent) the need for nominal RMB appreciation.

Persistently weak labor productivity growth has created a situation in which unit labor costs do not fall, even if real wages remain stagnant or decline.

A decade of wage growth exceeding productivity gains led to real appreciation, loss of competitiveness, and large current account deficits.

The economy therefore limped along year after year, with real GDP in the final quarter of each year less than 2 higher than it had been a year earlier. Employment grew more slowly than the population, and annual real wage increases averaged only about 1 .

Prepayments involve paying off at par the outstanding stock of debt.

The Parties may note that the nominal budget increase of 5 per cent from the 2002 2003 budget to the 2005 budget translated into a significant decrease in the amount of available resources, mainly due to the impact of the depreciation of Usthe United States dollar against the Euro This resulted in severe financial limitations that affect the work of the secretariat.