The Wage-Productivity Gap

[unlawflcombatnt]

Originally Posted by xoxoxoBruce

I'm not convinced it will help us by increase US wages to stimulate Chinese production. That's the fly in the ointment.

Of course somes wages are increasing.

Excellent points. Wages are increasing for the top income earners, and have been for the last 20 years. Increases in the wages of high income earners does much less to increase consumer spending than wage increases of lower income earners. As people earn more, they spend a smaller fraction of their income on consumer goods. They do, however, have more money to invest. But as consumer income stagnates, there are fewer investment opportunities created, because consumer spending creates those investment opportunities. The result is that this extra "capital" goes into non-capital investment areas, such as stocks and bonds, or toward overvaluation of the housing market. Much capital is now going into foreign production facilities, as you alluded to. That creates NO jobs in this country. In effect, the money American workers pay for goods is slowly leaking out of the economy into non capital goods endeavors and foreign capital goods purchases, creating jobs overseas and further reducing labor demand (and jobs) in the U.S.

The economy needs balance between the "means of production" & "means of consumption."