The aggregate level of retail prices in Slovenia is much lower than in Austria. For the average of the sample in February 1992, it was 25% lower (calculated on basis of the official exchange rate) and 35% (resp.) lower (calculated on the basis of the market exchange rate). Also the purchasing power of the Slovene average net wage is much lower than the purchasing power of the average net wage in Austria. After 1987 it was constantly diminishing and in February 1992 reached only a good fifth of the Austrian one (21,2%). Disparities in retail prices in Slovenia have several reasons. The basic reasons are disparities in producer prices (which are due to the undervalued primary factors of production and to insufficient activation of factors of production of higher ranks), the system of turnover taxation and administrative price regulation.

The first section of this study deals with some general theoretical contradictions and methodological issues concerning the real wage employment relationship. It also gives some explanations about the choice of applied method. Although some contradictions about the causality of the relationship are present, there is no doubt from theoretical as well as from common sense poin of view that real wage rise induce employment decline. The second section discussed some theoretical considerations of the wage-employment relationship in transitional economies - Svejnar's model of the labour market, and some throughts on employment and wage levels in terms of insider/outsider theory. The third section presents some indicators of macroeconomic performance and highlights the problem of rising unemployment in the transitional economies of Huhgary and Slovenia. The fourth section deals with the real wage/employment relationship in Slovenia and Hungary. It presents the results of empirical estimates of the real-wage/employment relationship in Slovenian industry in 1991-93. Since a very simple econometric methods has been used, it should be stressed that the analysis must be viewed as an initial, imperfect attempt. Finally, in the fifth part, some considerations of income policy are presented, due to the emerging rise in real wages experienced in both countries.