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September 08, 2018


Christopher H.

we might as well try. what is the alternative? There is actually good evidence higher wages entails higher productivity gains. England industrialized first b/c of higher wages. Post-war soc dem years had higher growth and productivity gains than after the Reagan/Thatcher years.

If capital goes on strike, then you move to more radical reforms.

I like the SWF-Social dividend / McDonnell reforms b/c they take the power of capital away from the rich.



In the U.S. about a third of income goes to the rich via capital income. Divert that to the rest of the population along with other reforms.

Tony of CA

I think I would go with Capitalism is spent- time to move on.

Geoffrey Ferrari

Your second paragraph is ambiguous between two claims. First, improvements in productivity for one firm might come because it is paying more than the average for firms in its class. This does indeed fall to the objection that, logically, not all firms can pay above average wages.

The alternative claim is that productivity for one firm can increase because it pays higher absolute wages. This could certainly increase productivity through the mechanisms of improving motivation and leading to lower staff turnover, for example. It's also logically consistent that all firms could pay higher absolute wages and so what's true for one firm could be true for all.


I read the IPPR summary and came away thinking - all good stuff but unlikely our government will implement any of it.

The growth period from the 1950s seemed driven by new hope, new technology and getting rid of old Victorian machines and systems. That cannot be repeated unless some truly useful innovations come along - and I can't see any. A wage led growth seems to be playing the same musical chairs game hoping we will create a few more chairs. The only path I can see is a race to the bottom - except for the top 5 percent.

Then looming dark on the near horizon is Brexit. We are already seeing signs of more austerity, the austerity card is easy to play and will get support from the right wing press. Which brings us to the 2022 election. Much heat and noise but the hard question remains as ever - how is a small rather overpaid nation going to make a living. Labour or Tory, I don't see a happy answer.

Luis Enrique

Chris you might enjoy this paper on inequality and aggregate demand by two of the profession's rising stars:


(their other recent work looks v good too:





Higher wages lead to higher productivity since they improve the return on investing in capital to eliminate work needed.

Higher wages also lead to higher productivity when the economy is overcapitalized and has more installed capacity than required for peak efficiency. (Hint: Stock buybacks are a sign of overcapitalization.)

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