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Wage misalignment in CFA countries: were labour market policies to blame?

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  • M Rama
Abstract
Wage rigidity, stemming from highly distortive labour market policies, is a natural candidate to explain the overvaluation of the CFA franc after the adverse external shocks of the 1980s. This paper uses a variety of data sources to assess wage rigidity in CFA countries until the 1994 devaluation, and to analyse whether it was due to labour market policies. The paper shows that wages were high in CFA countries, compared with both wages in similar countries and the labour earnings of similar individuals within the same countries. It also shows that wages were rigid in real terms, in the sense of following closely the fluctuations of government wages and consumer prices, but it finds no evidence of nominal wage rigidity, though. From an international perspective, minimum wages were not high enough to account for the observed wage misalignment. Moreover, their adjustment over time was highly responsive to real shocks. Private sector unions, in turn, seemed more instrumental in achieving wage moderation than wage drift. Their members usually had lower wages than similar, non-unionised workers, which probably reflects the 'subordinate' nature of the labour movement. The most likely candidates to explain wage misalignment and real rigidity in CFA countries in the 1980s and early 1990s are therefore government pay policies and (possibly) limited competition in product markets.

Suggested Citation

  • M Rama, 2000. "Wage misalignment in CFA countries: were labour market policies to blame?," Journal of African Economies, Centre for the Study of African Economies, vol. 9(4), pages 475-511.
    • Handle: RePEc:oup:jafrec:v:9:y:2000:i:4:p:475-511.
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    File URL: http://hdl.handle.net/10.1093/jae/9.4.475
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    Cited by:

    1. Sung Min Han & Fangjin Ye, 2022. "Labor union, between group inequality, and individual attitudes toward redistribution," Social Science Quarterly, Southwestern Social Science Association, vol. 103(5), pages 1248-1259, September.
    2. Nina Torm, 2018. "Does union membership pay off?: Evidence from Vietnamese SMEs," WIDER Working Paper Series 71, World Institute for Development Economic Research (UNU-WIDER).
    3. Nina Torm, 2018. "Does union membership pay off?: Evidence from Vietnamese SMEs," WIDER Working Paper Series wp-2018-71, World Institute for Development Economic Research (UNU-WIDER).
    4. Takahiro FUKUNISHI, 2009. "Has Low Productivity Constrained The Competitiveness Of African Firms? A Comparison Of Kenyan And Bangladeshi Garment Firms," The Developing Economies, Institute of Developing Economies, vol. 47(3), pages 307-339, September.
    5. Kaptouom, Patricia C., 2007. "The West African economic and Monetary Union: past and present of an exceptional north-south-south-integration," Discussion Papers 2007/19, Free University Berlin, School of Business & Economics.
    6. Azam, Jean-Paul & Dia, Magueye, 2004. "Pro-Poor Growth in Senegal," IDEI Working Papers 325, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Azam, Jean-Paul & Dia, Magueye & Tsimpo, Clarence & Wodon, Quentin, 2007. "Has Growth in Senegal After the 1994 Devaluation Been Pro-Poor?," MPRA Paper 11110, University Library of Munich, Germany.
    8. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
    9. Jean-Paul Azam, 2004. "Poverty and Growth in the WAEMU after the 1994 Devaluation," Journal of African Economies, Centre for the Study of African Economies, vol. 13(4), pages 536-562, December.
    10. Stephen Golub & Faraz Hayat, 2014. "Employment, Unemployment, and Underemployment in Africa," WIDER Working Paper Series wp-2014-014, World Institute for Development Economic Research (UNU-WIDER).
    11. Freeman, Richard B., 2010. "Labor Regulations, Unions, and Social Protection in Developing Countries," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4657-4702, Elsevier.

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