What accounts for wage austerity?

What we call wage austerity, i.e. a weakening of employees' bargaining power that leads to a skewing of income distribution at the expense of employees, small wage increases, and inflation, started in OECD countries in the late 1970s in the United Kingdom, then appeared in the United States (1980s), Japan (1990s), Germany (early 2000s) and Spain (since the 2008 crisis). Only France and Italy have avoided wage austerity, despite a few labour market reforms. Why did governments from the late 1970s want to make labour markets flexible and curb wages? Governments can have several motivations that we can identify: An ideological motivation: as Milton Friedman stated in the 1960s, all monopolies must be fought, including union monopolies; Precisely the damage caused by unions’ excessive power (“closed shop” clauses in the United Kingdom and the United States) that gave unions the control of labour markets, reduced the economy’s productivity and efficiency and generated endless strikes; The appearance of requirements for a high return on equity for shareholders at a time when productivity and growth were slowing down, which could then be obtained only by squeezing wages ; The gradual introduction of free trade, which put countries in cost competition, first between OECD countries, then with emerging countries; The determination to fight against inflation, which intensified in the late 1970s and the early 1980s due to rising oil prices and the indexation of wages to prices. All these reasons drove almost all OECD countries, one after another, to choose wage austerity .