This dissertation, titled “Flexibility in European Wage Structure and its implications for the European Unemployment,” studies the problem of high rates of unemployment in Europe during the last few decades through the optic of European wage behavior. It examines the European wage structure – within and between European countries – to find out factors that drive wages and thereby, unemployment rates in European countries. A conventional view of European problem of high unemployment argues that European wages are explained by cross-country differences in certain labor market policies and institutions, and that the policies and institutions at the country-level are the principal source of the problem. This dissertation argues instead that European wages are explained by differences in macroeconomic performances and in levels of international competitiveness between countries and also between sectors within the countries, and by certain continental and global level factors, and that a full understanding of the effects of those factors is necessary to explain the European problem of high unemployment. By applying numerical techniques, namely a combination of cluster analysis and discriminant function analysis, this dissertation finds that European wages are driven by factors pointed out by the dissertation, which also explain the high rates of unemployment in Europe over the last few decades. / text