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Raising wages should be a key component of economic growth strategies across the world

Onaran, O. & Stockhammer, E. (2014) “Raising wages should be a key component of economic growth strategies across the world“, LSE EUROPP, 07 May.  

 

What impact do wages have on economic growth? Ozlem Onaran and Engelbert Stockhammer write that the size of wages as a percentage of state GDP has been falling across the world. They argue that this poses a problem because the negative impact on aggregate demand caused by this falling wage share is not offset by a rise in investment and net exports, as many mainstream economists believe, which damages economic growth. They state that a wage-led recovery as a way out of the crisis is economically feasible, requiring the establishment of sufficiently high minimum wages as well as macroeconomic policies reversing welfare state retrenchment and financialisation.

 

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