I'm in the investment deficiency camp but that raises another conundrum. If the allocation to capital is so high, why aren't folks investing more?
The usual argument i have heard for why the price of labor has yet to be bid higher is due to the amount of new labor that has been introduced to the international market in the past 20 years.China and India being more integrated into the world economy brough on a lot more labor.
Applicable?:"Following a Post-Keynesian framework, the main determinants of capital accumulation andfinance have been analysed and tested. According to Kaleckian principles, the accumulationof productive capital appeared largely driven by the economic rate of profit and availablefinance. But the financial rate of profit, i.e. the rate of return on equities held, seems toexercise a negative effect. In that respect the boom of stock exchange and the increase offinancial profitability could have contributed to slow down the accumulation of productivecapital on behalf of financial accumulation. Indeed, the demand of equities by firms is ratherstrongly influenced by the rate of return on equities. This arbitration, which seems to prevailbetween real and financial accumulation, could contribute to explain the insufficient recoveryof investment which is one of the determining factors of the weakness of growth andemployment in France, as in many other European countries."Investment and rate of profit in a financial context:The French caseM. Clévenot and J. MazierCEPN-CNRS, University Paris-Nord UMR n° 7115December 2005
Anonymous @ 5:25:The "Chinese and Indian Workers Did It" argument doesn't match the timing. Globally, the profit share started rising in the mid 1980s, not the late 1990s when those two countries first really came onto the scene.
The question assumes what actually needs to be put into evidence, that is that labor markets anywhere are truly competitive. On this front it is allways in employers favor to cooperate to keep wages low, openly where this is legal, covertly where not.In England in the Industrial Revolution there was strong demand for labor. Which didn't keep manufacturers from deliberately redesigning machinery so that it could only be operated by children who were cheaper. And skilled employees who asked for raises were put on the original shared 'blacklist' and denied employment anywhere in the industry.Under English and then American law it was equally illegal to fix wages or collective bargain. To my knowledge there was never a single case of government intervening on wage fixing, yet entire books have been written about government criminal and even military intervention against workers organizing for the right of collective bargaining.I worked for the County for over ten years. And the response to wage increases was always to do a wage study using comparable jurisdictions. If the study didn't show that our wages were lagging generally HR or the County Council would deny the raise. Which really is just statistically based wage fixing. And since public employees are not generally allowed to strike means no ability to bargain at all. Sure you can walk, then again we are one of the few groups in the country that have full benefit packages and a secure pension plan.So while you might have real competion for wages among top level academics or CEOs or star engineers most of us are stuck with a salary scale that directly or indirectly is set at an industry wide level.Why aren't they bidding up wages? Because it hurts the bottom line. And owners who openly break ranks will hear about it over drinks at the Club.
anonymous II,Give me a break. How do you come to the conclusion that co-related world wide phenomenon must be temporal equivalents? Absurd conclusion is too polite a response to such a specious comment. China and India may have been recognized as serious contenders as late as the '90s, but they were certainly building their reputation well before that. Nixon and company made "friends" with the People's Republic in the '70s, and they haven't looked back since then. US labor has also been under assault from earlier contenders in the third world through out Central America and the Pacific Rim. China and India are the new big guys in the game, and they are very big. Free trade is no longer based upon comparative advantage which bore some relationship to an economy's own natural resources or long term industrial specialization. Labor is the resource that's being sought. The multi-national nature of corporations eliminates any concept of nationalism and concern for local labor sources. The cheapest labor is that which exists within a political environment characterized by entrenched and over bearing central government. An excellent opportunity for exploitation. Therein lies the wage stall across the globe. If a Chinese worker is better off earning two dollars a day instead of just one, that worker is still grossly exploited. His gain, if that's what it is, is our lose.
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