The working-age share of global population peaked in 2012. Are global wages about to turn?
Joyce Park stashed this in Economics
Really this is an argument that demographics are more important than policy. Regardless of where you fall on that spectrum, it is quite notable that the working-age share of global population peaked 3 years ago and will not easily rise again over the foreseeable future.
The article makes it sound like no amount of policy can help overcome worldwide demographics.
Taking just wage growth, simply put (and for more detail follow the links above), an end to the global labour glut should see real wages (wages accounting for the change in prices) start to rise at a faster pace. An ONS report of 2014 found that UK real wages in the 1970s and 1980s grew by an average of 2.9% a year.
That fell to 1.5% in the 1990s, and 1.2% between 2000 and 2010. A smaller workforce though should raise demand for workers, restore some bargaining power and could see that trend of declining real wage growth reverse.
And, as Charles Goodhart has argued, a trend towards rising real wages could have important implications for inequality. As the relative returns on labour versus capital rise one would expect inequality to fall. In other words, Professor Piketty may be wrong to fret about ever rising inequality - demographic change should bring it down.
When I last blogged on demographics, wages and inequality I received a large amount of feedback via Twitter of varying degrees of politeness. To many the idea that a global demographic change - rather than changing tax rates, the growth of finance, the decline of trade unions or some amorphous concept that goes by the name "neoliberalism" - has driven inequality is contentious.