More Pressure on Global Wages Could Backfire

Rising income inequality contributed to the global credit crisis. Further downward wage pressure could add to more global imbalances, debt woes and reluctance of customers who count pennies to consider new products – particularly in the United States and Europe, the big consumer markets for global producers. Corporate profits are surging while average wages are in decline, and the inequality and resistance to debt drives consumer behavior. Inequality a decade ago was masked by easy credit along with consumer willingness to take on debt in anticipation of higher wages in the future. “[T]his time around there will be scant help from the credit world to offset the subsequent hit to relative incomes and consumption,” reports Mike Dolan for Reuters. “And the social and political consequences of another hit to worker incomes may be all the more acute.” Global consumers are increasingly restrained from buying more than what they need, reports the International Labor Organization, and this could lead to surpluses, price pressures, unemployment and global depression. – YaleGlobal