WAGES IN CROATIA - CONDITION AND IMPLICATIONS OF DIFFERENT SCENARIOS OF FUTURE TRENDS

The subject of the paper is the analysis of wages trends in transitional period in Croatia and consideration of macroeconomic implications of several possible scenarios of future wages development. Such analysis should help the bearers of economic policy in defining main principles of wage policy in the forthcoming years. The increase of wages supply after 1994 was the main originator of personal consumption growth and one of the main factors of entire economic growth in the following years. Expenditures for public sector wages were increasing their share in any how strongly growing entire government expenditure. Growing domestic consumption also caused remarkable deficits of current account and growing foreign borrowing. Sustainable economic growth on these bases is not possible in Croatia any more. Therefore it has been considered what can be done in wage policy in order to change that. In the first part the paper gives the analysis of condition, both of entire economic and of wages themselves. It shows comparisons of wages trends and other macroeconomic indicators during the period of time, international comparisons of levels of wages and their purchasing power, as well asanalysis of wages by sectors, and tax burden of wages. The second part shows implications of four possible scenarios of wages trends in following years. Depending on variant chosen by economic policy bearers or agreed upon by social partners, the results are different in view of economic growth, deficit, balance of payments, rates of investment, national savings and employment. Projections show that growth of wages which lags behind the GDP growth improves entire economic efficiency of economy. Stronger restriction of wages and employment in public sector accelerates economic growth but has short-term cost in the form of strongly growing unemployment. If private sector integrates with public in wage policy according to which average wages would grow more slowly than the growth of productivity, entire economic efficiency would be higher than if such policy is conducted only by public sector.