Consumption by capital income will decrease further even as wages perk up
On a day that news comes out about wage growth perking up, the stock markets fall. (link to Dean Baker’s post) At the moment, the Dow is down 1.18% and the Nasdaq is down 1.81% for the day. The Dow has fallen below my attractor level of 16,800. A day when the stock market falls tends to make capitalists think a little more before they spend money on personal consumption. It might be better to just save the money. The market will not recover like it did in preceding years.
So all the waiting to get unemployment down so that wages could rise, so that consumption would strengthen… can be undermined by the peaking of the markets. Consumption by capital income will decrease further even as we see wage growth perking up. Firms have pushed their profit margins to high limits supported by easy monetary policy. Labor has been left behind. Labor demand, or better said, Labor appreciation, has been low.
In my view, we let capital income get too large. Now they have the capacity to significantly undermine the benefits of wage growth near the end of the business cycle.
This day tells the story…
The ECI numbers don’t seem to be saying that wages are growing much. It appears that your complaint that labor’s share remains too small is still valid and probably will remain so. If, as you contend and as seems reasonable, capital’s expenditures will decline, then it looks like a slippery slope ahead.
So, what policy to pursue? What really, other than militant unionism which seem unlikely in the extreme, is going to push labor’s share back where it needs to be?