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January 28, 2011


Luis Enrique

I agree - how many UK firms are on that margin where a small decline in UK wage costs will open up profitable investment opportunities, after accounting for offsetting demand effects? besides, if real wages are falling because imported input prices have risen, that doesn't help firms anyway. I guess FDI might increase?

Is there some reason to think firms have pent up investment demand anyway? if so, investment might save his bacon even if the wage squeeze has nothing to do with it.

nb - have you seen most recent WWCI on this topic?

when does data on income shares get released? will be an interesting series to watch.

Paolo Siciliani

I guess that the argument is that exports would make up for reduced consumer spending at home.
But my point is that to penetrate export goods markets (let alone labour intensive services) you need to provide good quality, which I believe most of it is due to a committed and happy (if you like) workforce. Now I doubt that lower real wages could actually be a boost to growing exports in this respect. See the German example and the comparison in terms of market outcome between WW happy workforce and FIAT squeezed ones....

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