All countries have been buffeted by the forces of changing technology and stronger global competition. So why should wage differentials in most of continental Europe have changed by much less?
The answer is that deregulation in America and Britain has allowed market forces to do their work, whereas in continental Europe powerful trade unions, centralized wage bargaining and high minimum wages have propped up the wages of the low-paid. Indeed, pay differentials narrowed through the 1980s in western Germany, where trade-union membership has held steady at around 40% of workers over the past 20 years; in America, membership has fallen from 30% to 12% since 1970.
