Even McKinsey Gets It: High Wages Improve Economic Performance
"After a year-long analysis of seven developed countries and six sectors," global management consultancy company McKinsey has "concluded that demand matters for productivity growth and that increasing demand is key to restarting growth across advanced economies." Which means—surprise, surprise—higher wages for the workforce. The report by James Manyika, Jaana Remes and Jan Mischke was published in the Harvard Business Review.
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If deficient demand (and a concomitant commitment to full employment) is not considered relevant as far as productivity goes, the policy framework is very different. Fiscal policy is diminished because there is little point in "wasting" limited financial resources on fiscal stimulus, higher real wages, or a restructuring of the private debt overhang. And economic inequality doesn't even factor into the equation at all. Rising inequality, growing polarization and the vanishing middle class have all been seen as unfortunate, but inevitable byproducts of globalization, rather than drivers of slow potential growth.
By contrast, the McKinsey analysis leads to a very different policy outcome—one that places demand management and full employment at the heart of macroeconomic policy-making.....
ps from June: Some consider the lag in introducing innovations made possible by artificial intelligence partially related to low wages. [Obviously, a mixed blessing, given our limited social supports for the jobless.] For example, Kevin Cashman, https://theminskys.org/--
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