WAGE INCREASES AND COMPETITIVENESS OF THE SLOVAK ECONOMY

Recently much attention has been paid to the analysis of relations bet ween wage development and labour productivity in transitional economie s; this relation constitutes one of the factors of possible danger to their competitiveness. Attention is being paid not only by the relevan t countries themselves, but also by various international institutions . This paper to a certain extent follows up these analyses. The paper has two basic aims: to present a concise but at the same time relative ly complex review of methodical procedures used for the quantification of the relation between wages development and labour productivity and its international comparison, and to characterize the position of the Slovak economy in this relevant field on the basis of the particular analysis of the development tendencies of this economy. Attention is f ocused not only on the investigation of the dynamics of the parameters followed, but also on the identification of their achieved level in c omparison with other countries. In the first - methodical - part of th e paper the indicator of the unit cost of work (JNP) is the basic star ting point for the quantification of the relation of wages and labour productivity. At the same time input data applicable for its quantific ation and various possible methods of their construction are character ized. Current monitoring of JNP dynamics does not provide sufficient i nformation necessary for an evaluation of how JNP development influenc es the competitiveness of the economy. Only the quantification of the dynamics of internationally comparable JNP (JNP(MP)) and detecting the ir relative dynamics (in relation to other, usually competing countrie s) after the method presented in this paper enables evaluation, whethe r the position of the monitored economy improves or deteriorates as fo r its competitiveness. Considering the sizeable lag of the transitiona l economies behind the economically developed economies in wages as we ll as in labour productivity levels, and also systematically faster gr owth of JNP(MP) in transitional economies compared to economically dev eloped economies, the paper focuses its attention also on the methodic al problems linked with the recognition of the internationally compara ble level of JNP. The determination of an internationally comparable l evel of labour productivity is especially problematic. Adherence to th e universally established principle - to express labour productivity f or JNP quantification in comparable prices - is ensured in this case b y the use of an indicator of purchasing power parity (PPP). The result s reached on the basis of PPP utilization should be considered, howeve r, as certain estimated values, which nevertheless approximate reality much more than the indicators based on currency exchange rates. Gradu al changes of the relative level of JNP (calculated on the basis of th e recognized relative JNP level and continued monitoring of the JNP(MP ) dynamics) can relatively comprehensively evaluate the intensity of t he growing JNP influence on competitiveness. They do not reflect only actual changes in relative JNP(MP), but also initial relations of thei r level. In the second part of the paper presented methodical procedur es are applied to the particular analysis of the JNP development in th e Slovak economy, both on the national economy level and within the fr ame of the manufacturing industry. Based on the approximate calculatio ns one discovered that in the national economy of the Slovak Republic the JNP in 1997 reached about one third of the Austrian level, which i s about 6 per cent points more than in the year 1993. The obtained res ults confirm to a certain extent that the Slovak economy has, above al l in relation to the economically strongest partners, still a relative ly large space for an increase of the relative level of JNP. One can e stimate that Slovakia will, at the current relative JNP growth rate, r each 70% of the Austrian JNP roughly around the year 2010. Analysis of the development of JNP in manufacturing industry is of primary import ance for an appraisal of the influence of wage increase on competitive ness, since the manufacturing industry directly enters the foreign tra de exchange. The paper characterizes JNP development in the Slovak Rep ublic in the years 1993-1997 and compares it with the development in s elected CEFTA countries; at the same time it traces the JNP(MP) level in monitored countries compared to the Austrian level. Some results fo llow. The difference between Slovakia and, the economically developed countries measured by the levels of comprehensive hourly labour costs (UNP) in the manufacturing industry still remains extraordinarily wide - in the year 1996 the hourly UNP in Slovakia compared to Germany rea ched only one tenth, compared to the EU average about 15%, compared to Portugal (EU country with the lowest hourly UNP) somewhat more than 5 0%. In the year 1993 in the Slovak manufacturing industry compared to Austrian manufacturing industry (after the calculations of P. Havlik [ 16]) labour productivity reached 39%, yearly wages 6.7% and JNP 17.2%; our calculations suggested that during the years 1994-1997 relative J NP in this branch increased by 50% and in the year 1997 reached roughl y 26% of the Austrian level. The growth of relative JNP can be witness ed also in the Czech Republic (34%) and in Poland (18%). In Hungary, o n the other hand, relative JNP in manufacturing industry dropped durin g the monitored period, also due to currency exchange rate changes, by almost 30%. In all monitored CEFTA countries the relative level of JN P in manufacturing industry, which was fairly differentiated in 1993 ( 17.2% in Slovakia and 36.9% in Hungary) reached during the years 1994- 1997 virtually the same level - about one quarter of the Austrian valu e. Irrespective of the necessary approximation, the analysis of the re lative level of JNP for the Slovak national economy and particularly f or the manufacturing industry shows that wages development at the exis ting relative level of JNP should not endanger competitiveness of the Slovak economy to such an extent that could lead to an external unbala nce. The hot-bed for the latent external unbalance creates a whole com plex of problems and limitations which prevent particular subjects to assert themselves in the international trade exchange. One can hardly solve these problems by the attenuation of wage increases only. The fo cal point in the process of Increasing Slovak export perform