The Effectiveness of the Wage Regulation Systems as Anti-Inflationary Tools

Abstract

Up to now we have devoted much of our attention to the so-called stimulative function of wage regulation. This has not been accidental; most of the countries under review experience greater difficulties with the consequences of the stimulative function than they do with the regulative function. For example Hungary carried out several modifications in its SWR, not because it was not able to cope with wage inflation, but primarily for stimulative and wage-differentiation reasons. To make the SWR effective it is necessary to strike a reason-able balance between its regulative and stimulative functions. It is not difficult to design a system which would limit wage growth to the plan targets; the crux of the problem is to design a system where the regulative and stimulative functions do not conflict, but instead further each other.