Tag Archives: wages

Greater Inequality Not Due To New Technology And Free Trade

scoccoBy Sandro Scocco is Chief Economist at the Stockholm-based think tank Arena Idé and has a background as the Chief Economist of the governmental research institute ITPS. He is also a former Director at the Labour Market Board and served during the 1990s as an adviser to several Swedish social democratic ministers.

From the Social Europe Journal, December 9, 2016

A popular narrative today is that low-income groups in the western world have fallen behind owing to jobs lost to new machines and to low-paid jobs overseas. Political populists like Trump or Le Pen have happily exploited this frustration with nostalgic, nationalistic and anti-free trade messages. A new study shows that this narrative has little support in historical trends.

Certainly, large groups have fallen behind in recent decades. But this is true not only of low-income groups but also of large parts of the middle class in many countries. Take, for example, those with higher education in the US; their real incomes have stagnated in the past 15 years. In the whole of the industrialised world median wage growth has fallen markedly behind GDP growth. By contrast, the top 1 percent have increased their income much faster than the rise in GDP and, in some countries, including the US and Sweden, they have more than doubled their income share.

So, there is a clear breeding ground for anger and frustration among broad groups, and not just among low-income earners, but is it really related to technology and trade?

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The Technological Revolution And Labor’s Share

Andy-HaldaneAndrew G Haldane, Chief Economist, Bank of England

In a speech to the Trade Union Congress in London, (November 15, 2015), Andy Haldane discusses how developments in technology are likely to affect labour’s share of national income in years to come – and the implications this may have for policymakers.

Andy notes that arguments about “technological unemployment” – the idea that technological advance puts people out of work and bears down on wages – have been raging for centuries. According to Andy, most evidence shows that over the broad sweep of history technological progress has not damaged jobs but rather boosted wages: “Technology has enriched labour, not immiserated it.”

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