Sunday, February 7, 2010
Wages and the Recession
This article discusses how wages are no longer determined by productivity. The author states that usually productivity growth and wage growth move together, but that this is not currently happening. During the recovery process, companies are cutting costs wherever possible. Wages are obviously one way to do this. Many have moved jobs overseas where labor is cheap. The rise in health care costs have also made it difficult for firms to increase wages substantially. The short run outlook is not very rosy, and neither is the long run according to this article. Wages have seemed to level-off.
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This article suggests that unemployment in the United States will continue to maintain high levels especially if companies continue to employ overseas labor. This is why President Obama has continued to emphasize jobs as his number one focus and it is not surprising why.
ReplyDeleteI understand the difficulties that companies may face with high costs however they should get on board with the government and try to stimulate the economy through creating employment. It is a difficult situation to remedy and it is why the government has to continue to create employment opportunities.
The productivity-wages proportional realtion is no longer valid. Companies have higher incentives to employ workers in foreign countires, which inconsequence can be double-troubling policy. First of all the wages that were supposed to be distributed among local labors are being taken away by others on the other hand the GDP growth which emphasis on the output is being hindered.
ReplyDeleteIn such consequenece government has to provide incentives to the companies so that they can accomodate workers on better wage in condition that wage must be high enough to cover their expenses.