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September 04, 2013


Luis Enrique

would it make sense if wage-led growth is possible if you start from a position where wages have gotten too low, in some sense, whilst profit led growth can happen if wages have gotten too high? In which case the eighties and nineties needn't worry us because the situation today is very unlike the seventies.

also, the idea that workers might use wage to pay down debts not spend only suggests a lag, it doesn't negate the idea. At some point, workers will have adjusted debts and use wages to spend.

Ralph Musgrave

Obviously if wage earners‘ propensity to spend (rather than save) is larger than employers‘, one gets a bigger „bang per buck“: that is, the effect on aggregate demand is bigger for £X added to wages as compared to £X added to profits. But the whole question is irrelevant because stimulus money costs nothing in real terms.

To put it crudely, printing loads of £20 notes and having government spend that money into the economy costs nothing. Or as Milton Friedman put it, „It need cost society nothing in real resources to provide the individual with an additional dollar in cash balances.”

So for example if the optimum wage to profit share is the one that currently obtains in Sept. 2013, there is nothing to be gained from increasing the share going to wages. One gets a worse bang per buck, but making up for that with more stimulus costs nothing.


I can understand wage led growth. It's capital led growth growth that doesn't make any sense. Why would a business spend more than it has to without an increase in income? Maybe if most business income came from other businesses, this might work, but an awful lot of businesses are heavily dependent on non-business customers, and they get most of their money from wages.

Philip Walker

Some of that negative coefficient (including anything below -2 as far as I can see) is because GDP growth turned negative, isn't it? I'd be wary of drawing too many conclusions from that graph, myself.

"I can understand wage led growth. It's capital led growth growth that doesn't make any sense. Why would a business spend more than it has to without an increase in income?"

For me it is precisely the other way round. I can understand why a business might invest capital: sometimes it is about the cost side rather than the revenue. But why would an employer spend more on wages than it has to without the prospect of an increase in income?

And is it not the *prospect* of increasing wages which drives growth rather than the increased wages themselves? By the time the wage increase arrives, it is too late for a business to invest to capture some of the increased spending.

Louis Vuitton Outlet

Is this still good news for the JT-Ozouf fiber optic investment in Jersey? My house in the UK was linked up to broadband 20 years ago.

Louis Vuitton Outlet

Well done ! Drinking water might have been more useful, but hey …


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