Hemlock for economic students
(Putting effective demand in the long run and prices of production together)
Tuesday, July 19, 2011
Tom Palley on a global wage policy
Tom Palley suggests that wages should be higher in surplus (current account) countries, to help re-balance the global economy. In the case of Europe, it seems really unlikely that Germany will expand the economy, and promote nominal wage increases to help the European periphery. With respect to the rest of the world it seems that Tom still believes that export-led growth is the engine of growth. In China it seems clear that domestic demand has taken over and that real wages (including minimum wages) have been increasing at a fast pace (see ILO's Global Wage Report). The world economy needs more growth in the US and Germany, China and other developing countries are actually doing their job to help in a global recovery. Tom believes that competition from low wage countries has had a negative impact in labor conditions in the North. I tend to believe that the problems have more to do with political economy problems in the North, in particular the ascendancy of conservatism since the 1980s. But nothing against high minimum wages, which is Tom's main point!