Engelbert Stockhammer
Abstract
Wage-led growth is an equitable strategy for recovery that realises that wage growth can support demand via consumption expenditures and it can also induce higher productivity growth. This Research Essay provides an overview of the concept of wage-led growth, both as an analytical concept and as an economic policy strategy. It distinguishes between wage-led and profit-led demand regimes and argues that the available evidence indicates that demand in most economies is domestically wage-led. Changes in functional income distribution also have supply-side effects. Available evidence suggests that higher wage growth induces higher productivity growth. Neoliberalism resulted in an increase in inequality and a decline in the wage share, but growth has nowhere been based on the profit-led growth process. Rather, neoliberalism has given rise to either debt-led or export-led growth regimes, both of which are unstable. This Research Essay concludes by outlining a wage-led growth strategy.