September 25, 2018

IT'S A DEFLATIONARY EPOCH:

The Most Successful Firms Aren't Focused on Raising Wages, RBA Suggests (Michael Heath, September 25, 2018, Bloomberg)

The Reserve Bank of Australia may have solved the weak wage growth puzzle that's beguiling economists the world over: the most successful firms just aren't placing much priority on higher salaries.

"High productivity firms would appear to be using most of their higher levels of productivity to reduce prices and increase profit margins rather than passing most of it on to their workforce in higher wages," RBA economist Geoff Weir said in a discussion paper published Tuesday. "The productivity 'laggards' have limited scope to pay higher wages."

In his paper, 'Wage Growth Puzzles and Technology,' Weir says the uneven take-up of new technology by companies is seeing an increased disparity in productivity performance. He cites that as a key factor in the longer-run issue of why labor's share of national income has been falling, and the shorter-term one of why nominal wages have been weaker than forecasts predicted.

Own the company; don't work for it.  Or, ideally, own the company you work for.

Posted by at September 25, 2018 4:00 AM

  

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