Raises and cuts in public sector salaries have a direct effect on the private sector

A joint study of the Bank of Spain and the Pablo de Olavide University (UPO) confirms that public salaries are clearly influential throughout the whole of Europe's economy. For the study, researchers chose a representative sample of four EU countries: Italy, Spain, Germany and France. According to the Organisation for Economic Cooperation and Development (OECD), the public sector employs an average of 20% of Europe's working population.

"The rises and cuts in the salaries of public sector workers put pressure on the private sector in the same financial year," states A. Jesús Sánchez Fuentes, co-author of the study by the Pablo de Olavide University and the Bank of Spain which is published in the Empirical Economics journal.