Increase In Real Wages Research Articles

MONETARY REGULATION IN THE ECONOMIC GROWTH OF A STATE

Abstract. In the article it is provided a comparative analysis of monetary regulation models and explores their impact on economic growth. The aim of the paper is to study models of monetary regulation and their impact on economic growth. It has been established that monetary regulation of any country in the world should be aimed at ensuring economic growth. The authors of the article proved that monetary regulation should be considered as a source of economic shifts, an increase in real wages and living standards accordingly; it acts as a measure of inflationary processes’ containment, which, in turn, meets strategic objectives of monetary policy. The study showed that the rapid development of monetary policy and economic growth theories is marked by certain contradictions, uncertainty and cross flows. The evolution of theories is represented by the Keynesian Liquidity Preference Theory, Monetarism, Neoclassical Real business-cycle theory, the Neo-Keynesian model, and the New Consensus Model. Each of the models has its own characteristics, based on the objects of monetary regulation (money supply, inflation, interest rates, exchange rate). Based on the analysis of the views of researchers on the impact of monetary regulation on economic growth, the authors concluded that concepts are divided according to those that characterize weak relations between these phenomena, and those that prove close correlation. It is concluded that the influence of monetary regulation on economic growth takes place when choosing the regulatory model itself and instruments for its implementation. It is proved that the model of monetary regulation should be based on developed monetary rules. The authors of the article proved that in Ukraine, in conditions of using a monetary design based on the inflation targeting regime and taking into account the importance of increasing the efficiency of using main instruments of monetary regulation, it is necessary, first of all, to ensure the consistency of monetary and fiscal policies. The coordination of monetary and fiscal policies should consist in developing and implementing them in such a way that they do not contradict each other and together contribute to the achievement of the common goals of economic policy, such as sustainable economic growth and low unemployment in terms of long-term price and external stabilities. It is concluded that the insufficient efficiency of the monetary transmission mechanism is reflected in the imbalance of money and foreign exchange markets, the deformation of the credit market and the credit climate degradation, and the decrease in the influence of monetary impulses of the central bank on both the financial system and the real sector of the economy. That is, the main problem of the significant influence of monetary regulation on economic growth in the country lies in restoring the effectiveness of the channels of the transmission mechanism of monetary policy, which depends on the choice of monetary design. Keywords: monetary design, economic growth, monetary instruments, monetary regulation, monetary rules. JEL Classification E50, 58; O49 Formulas: 0; fig.: 7; tabl.: 0; bibl.: 23.

A new framework for analyzing technological change

Technological evolution is widely thought to be the primary process that brings about economic growth. It is one of the main targets of evolutionary economics, but how technological change induces economic growth has remained unexplained. Based on the new theory of value, this paper explains how technological change leads to long-run improvement in real wage rates and income per capita. Section 2 gives a brief overview of the new theory and presents two theorems (minimal price and the convergence theorem) that afford the basis of analyses in Sections 4 and 5. Before these, Section 3 compares two price systems, traditional and new, and compares efficiency from two points of view. Traditionally economics with equilibrium has been concerned with those conditions that provide allocative efficiency. However, technological evolution comprises a series of half-blind selections of ‘better’ production techniques and exhibits another kind of efficiency that can be named dynamic efficiency. The latter is more important than the former. Allocative efficiency is self-destructive, while dynamic efficiency is cumulative in its effects. Section 4 shows how technological change works cumulatively and how it leads to real wage increases and income per capita. Section 5 shows that the new theory can explain the emergence and growth of global value supply chains as a part of technology choice arising through international trade. This paper is mainly focused on supply-side theory, while problems concerning the demand side are considered in Section 6. Section 7 concludes.

Retos nodales del desarrollo económico en México durante el quinquenio 2020-2024

Este artículo analiza importantes retos del desarrollo: generar suficientes empleos remunerados para los jóvenes que cada año buscan por primera vez puestos de trabajo; absorber gradualmente el enorme rezago de empleos dignos; mejorar la distribución funcional del ingreso vía incremento sostenido de los salarios reales; erradicar la pobreza extrema y reducir la pobreza moderada. Para superarlos, el reto crucial es lograr que la economía mexicana crezca a tasas mayores de 6% anual. Esto no puede conseguirse con la estrategia neoliberal, que apenas arrojó 2.3% de crecimiento anual durante los pasados seis sexenios. Un crecimiento económico a tasas asiáticas es factible mediante una certera estrategia de desarrollo.

Labor Costs and Corporate Investment in Italy

The recovery of private investment in Italy has lagged its euro area peers over the past decade. This paper examines the role of elevated labor costs in hindering the recovery. Specifically, labor costs rose faster than labor productivity prior to the global financial crisis and have remained high since, weighing on firms’ profits, capital returns, and thus capacity to invest. Empirical analysis provides evidence for the impact of wages on investment at the sectoral and firm levels. Sectoral wage growth seems unrelated to sectoral productivity growth, but is negatively associated with investment. Firm-level data permit a better identification—by exploiting the interaction between sectoral wage growth (exogenous to the firm) and the lagged labor share of the firm. A 1 percent increase in real wages is estimated to cause a 1/3 percent fall in fixed capital. Profits absorb only ½ of the cost increase, pointing to the role of liquidity constraints. These results highlight the need for labor market reform to reinvigorate investment, and thus labor productivity and job creation.

Related and unrelated variety vs. basic labour market variables - regional analysis for Poland

ABSTRACT This paper examines the influence of related variety (RV) and unrelated variety (UV) on the basic variables of the labour market, i.e.: employment growth rates, increase in unemployment rates and real gross wages in the regional approach in Poland. The basic difference between the presented and the current research in this area is that the RV and the UV are introduced into the estimation taking into account the basic determinants of the analysed labour market variables resulting from simple economic models. Moreover, an attempt was made to determine the impact of the RV and the UV on real gross wages, which was not covered in the literature. The research was based on panel data for 16 Polish voivodships (NUTS2) and in the group of regions of Western Poland in the years 2004–2017 using SYS-GMM estimator of Dynamic Panel Data Model. In this paper, a significant positive impact of the RV on the rate of employment growth and wages was found, as well as a negative correlation between the RV and the increase in unemployment rates. On the other hand, the UV positively determined the increase in unemployment rates.

The limiting factor: energy, growth, and divergence, 1820–1913

AbstractOn the basis of a new series on the consumption of traditional and modern sources of energy between 1820 and 1913, this article addresses the start of modern growth and the great divergence on the world scale. Since the beginning of the nineteenth century, the greater availability of modern energy sources expanded working capacity well beyond the potential of previous agricultural civilizations. Growth of energy consumption rose primarily in western Europe, northern America, and Oceania. As a result, labour productivity rose, leading to an increase in real wages, which was an incentive to replace labour with mechanical engines. The higher energy consumption in these three macro‐areas led to global inequality in productive capacity and technology which peaked on the eve of the First World War.

Indian Farm Wages: Trends, Growth Drivers and Linkages with Food Prices

This study looks at trends in Indian farm wages, analyses their linkage with food prices, and identifies factors which drove their growth in real terms. We employ quantitative and qualitative analysis techniques for this purpose. A vector-error correction model (VECM) is used to determine the linkage between farm wage inflation and food inflation, and a pooled mean group (PMG) estimation method, used for dynamic heterogeneous panels, is used to identify the drivers of growth in real farm wages. In last 20 years (1998-99 to 2017-18), wages of India’s farm labourers increased at an average annual rate of 9.3 per cent in nominal and 3.2 per cent in real terms. For an average agricultural labourer, the daily wage rates increased from less than INR 45 in 1998-99 to about INR 229 in 2017-18. In real terms (2004-05 prices), this increase was from INR 50 to about INR 90 per day. The empirical analysis of the monthly wage time series identified a structural break in January 2007. Specifically, the curve is near-flat before this break-point subsequent which it rises sharply. On the relation between food inflation and wage growth, evidence was found of a food-wage spiral where changes in food prices and farm wages were estimated to impact each other. However, the impact of food inflation emerged to be stronger on wages than vice-versa and this impact was observed to strengthen post 2007-08. The panel study (1987-88 to 2015-16) on the drivers of real wage growth was conducted around the January 2007 structural break. Before this break, growth in real wages was estimated to be mostly driven by growth in the agriculture sector. Any influence of non-agricultural sectors (manufacturing and construction) did not emerge significant during this period. However, post the break, the growth witnessed in both- non-agricultural (manufacturing and construction sectors) and agricultural sectors explained the sharp increases in real farm wages. The large public rural employment program, MGNREGA (introduced in 2005) was identified as a third potential force of influence on rural wages; however, among other significant factors, its contribution to farm wage growth was estimated to be low and with a lag. Policy implications based on these findings are that for faster growth in real farm wages, focus needs to be on augmenting labour productivity in agriculture. In order to pursue that, one needs to lead reforms in agriculture that can accelerate agri-GDP growth and ensure that the rest of the economy, especially the manufacturing and construction sector, grow much faster pulling labour out from the agricultural sector to higher productivity jobs in manufacturing, construction, and possibly also services.

Decomposing Rural Income into Sectors to Identify Their Likely Contributions to Rural Poverty Reduction in Bangladesh

The article estimates the contribution of total income from each sector to the overall rural income. It tests if the poor, who are concentrated in the lower-income quintiles, gain most from farm or non-farm sources of income growth. Also, within the farm or non-farm income, what are the relative contributions of its different sources. The dominance of agriculture is still there for the lowest quintile of rural households, farming still being the dominant sub-category. Over 1991–2010, a 13 per cent decrease in per capita real income from agricultural wages for all rural households and a 41 per cent decrease in that for Quintile 1 rural households contradict the earlier finding that increases in real wages were one of the main contributors to poverty reduction. Quintile-wise decomposition suggests that a substantial income enhancement was realised at upper quintiles of rural households. It also appears from the quintile-wise decomposition that the efficiency enhancement was realised more at upper quintiles leaving a relatively smaller effect on poverty reduction.

ОСОБЛИВОСТІ ФУНКЦІОНУВАННЯ ТА ТЕНДЕНЦІЇ РОЗВИТКУ РИНКУ М’ЯСА ТА М’ЯСНОЇ ПРОДУКЦІЇ В УКРАЇНІ

On the basis of the analytical research the peculiarities of the meat processing enterprises functioning of Ukraine were identified, quantitative and qualitative trends of the meat and meat products market in Ukraine were investigated, factors influencing its development prospects were determined. The article points out that cattle meat production in Ukraine has been declining annually and has been unprofitable for the last 20 years. At the same time, it is proved that the meat industry in Ukraine has significant reserves and great prospects for development, the successful implementation of which is possible only if the negative phenomena and processes in the agricultural sector are overcome. The paper investigates that over the past year, there has been some increase in meat production, with a marked decrease in beef, veal and pork meat production and an increase in poultry meat production. The main problems of the industry and the ways of overcoming them in the current economic conditions are outlined. The main leaders of producers of meat products in Ukraine are highlighted. The dynamics of the poultry population and the production of this type of meat are discussed. The structure of livestock farming by agricultural enterprises and private farms is considered. The dynamics of the structure of meat production in Ukraine by types compared to 2014 and 2018 is provided. The desired market capacity, which could meet the needs of Ukrainians in the rational consumption of meat products, is 3.432 billion tons, but the actual consumption reaches only 2.295 billion tons, which is 66.9 % of the rational indicator. Among the main effective ways of providing market capacity are: increasing the availability of goods by introducing individual assistance to low-income categories of the population; an increase in the consumption of products outside the home, which will necessitate an increase in real wages; elimination in the food markets of non-equivalent product exchange; development of a balanced range of products at meat processing enterprises. Keywords: meat processing companies, meat and meat products market, meat and meat products production, poultry meat, turkey meat.

Where do profits and jobs come from? Employment and distribution in the US economy

ABSTRACT‘Meso’ level analysis of 16 producing sectors sheds light on broad forces shaping employment and profits. In a growth decomposition from 1990 through 2016, employment responds positively to output increases and negatively to rising productivity. The macro profit share responds positively to sectoral productivity and demand increases, and negatively to higher real wages. Jobs shifted toward sectors with high employment but slow productivity and real wage growth, contributing to an overall decrease in the wage share. Observed profit growth was robust in manufacturing, trade, finance and insurance, and information. The latter two (and wholesale trade) benefitted from favorable demand shifts. However, they generate less than a quarter of the total profits. Growth of remaining profits has been due to demand shifts and productivity growth which exceeded real wage increases. Market power matters in all sectors. The strongest effects may operate against employment and real wages in labor markets.

Wage rigidities and unemployment fluctuations in a small open economy

This study analyzes the implications of the monetary policy for the unemployment rate in a small open economy. We introduce nominal wage rigidities and unemployment into the small open economy version of the dynamic stochastic general equilibrium model. We derive three main findings. First, under nominal wage rigidities, the cyclical properties of the calibrated model, in response to a productivity shock, are consistent with the empirical evidence on a decrease in employment and an increase in real wages. Second, for all the variables considered, the Taylor rule tracks the optimal policy better than the simple rule with unemployment as an argument. Third, regardless of the output or unemployment gap being targeted, it is not optimal that central banks respond to nominal exchange rate variations.

Revisiting the Lewisian turning point in Taiwan

The Lewisian concept of dualism was empirically relevant to Taiwan given its heavy population pressure on scarce land. Most of the literature, albeit based on little solid evidence, concluded that Taiwan reached the Lewisian turning point around the end of the 1960s. Others argued that the LTP was after 1979. This paper first follows three criteria proposed by Minami (1973). We observe the active reallocation of employment after the mid-1960s and the dramatic increases in real wages of the agricultural and unskilled workers at the end of the 1960s. Furthermore, we introduce a new empirical methodology on the agricultural production function by adding a year dummy variable to identify a potential LTP, which leads to the agricultural marginal product of labor being zero before the LTP and becoming positive thereafter. Our findings support the notion that the LTP in Taiwan occurred around the period 1969–1973, rather than after 1979.

On the Controversies Behind the Origins of the Federal Economic Statistics

Our federal economic statistics originated in the economic and political divisions in the United States and the bitter debates over economic policy they engendered at the end of the 19th century and during the world wars and Great Depression. Workers were angry because they believed that they were being exploited by robber barons who were capturing all of the benefits of economic growth, while employers were just as sure that the second industrial revolution had brought workers an unparalleled increase in real wages. Other debates centered on the effects of unrestricted immigration on wages and employment opportunities of native-born Americans, on the effects of tariffs on prices paid by consumers, on the effects of frequent financial panics on employment, and, during the world wars, on the effects of wage and price controls on the living standards of workers. Participants on all sides of these debates believed that nonpolitical and accurate statistics constructed by experts would help to win support for the policies they favored. In most cases, the development of these statistics was led by individuals, private organizations, and state governments, although the federal government eventually took over the role of producing these statistics on a regular basis. Here I provide brief histories of the origins of US statistics on prices, national income and product, and unemployment to illustrate this story.

Налоговая реформа Д. Трампа: противоречивые эффекты

The first results of a large-scale tax reform of 2017 are analyzed. The effects and consequences of the tax reform are estimated based on a comparison of macroeconomic indicators of the American economy in the period 2013-2017, and in the subsequent period. The tax cut, starting in January 2018, had a relatively small effect on the acceleration of U.S. economic growth compared to the pre-reform period – by 0.6-0.7% on yearly basis. The main positive impact of tax reform has revealed itself in the investment activity of the business non-farm sector of the U.S. economy, particularly in the form of rapidly growing investments in intangible assets which represent the capital deepening which stipulate the scientific and technological progress. The record-breaking tax cuts on corporate sector profits of the U.S. economy were used by senior management of the leading US corporations to buy back shares from company owners, which markedly weakened the impact of tax reform on accelerating U.S. economic growth. Tax reform increased inequality in the distribution of income in American society in favor of its richest strata, which turned into a small increase in real wages and salaries of the bulk of the working people. The reform contributed to a noticeable increase in the repatriated earnings of the U.S. corporations to the U.S. economy, although in general the problem of shifting profits in offshore zones remains one of the most acute problems in the development of the U.S. economy. Tax reform has further intensified the crisis in the U.S. federal finance system and contributed to the fact that the chronic federal budget deficits under the Trump administration reached an annual size of $1 trillion.

The Australian labour market in 2017

Low wage growth consistently featured as the main underlying characteristic of the Australian labour market in 2017. Overall economic conditions remained weak, although unemployment was fairly static. All indicators of average wage growth declined: average weekly earnings, the wage price index and the average annual wage increase in enterprise agreements. Collective bargaining coverage continued to decline. Although the 3.3% minimum wage increase represents a modest increase in real wages for low-paid workers, the Fair Work Commission decision to reduce Sunday and public holiday penalty rates for some award-reliant workers would put further downward pressure on workers’ incomes. There were more successful applications to terminate expired enterprise agreements, including those where wage rates were thought to be uncompetitive and unsustainable. The underlying causes of low wage growth remain contested. Despite some agreement that the regulatory framework is a contributing factor, firm proposals for regulatory change are yet to emerge.

Globalization and Labour in Developing Countries: India

This article deals with labour under globalizing conditions in developing countries, particularly India.* It poses the question of how the convergence in global incomes and inequality has impacted on labour. In the context of the experience of the developing countries as a whole, the article argues that strategic interventions in global world markets can increase the share of labour in the benefits from globalization. Thereafter, the article deals with the position of India and shows that there has been an increase in rural real wages and in agricultural productivity after globalization. The article argues that globalization provides space for the upgradation of the capacities of labour in order to improve real wages and the quality of employment.

EVOLUCIÓN DE SALARIOS REALES EN ECUADOR DURANTE LA GRAN DEPRESIÓN, 1927-1937

AbstractThe monetary policies of the decade studied had a direct influence on the evolution of real wages in Ecuador. The gold standard brought with it the increase in real wages until 1932. In February 1932, the Ecuadorian Government decided to abolish the gold standard which, together with a heavy public expenditure, produced a significant increase in money supply causing high levels of inflation. The evolution of real wages in Ecuador is similar to the evolution registered in Latin America in two important aspects: in both cases an upward trend in real wages can be observed once the international crisis began; after the increase in the purchasing power of wages, there is a decline. This study is the first research trying to understand the impact of the Great Depression in Ecuador through the evolution of real wages.

Entry assumptions and welfare gains from trade

When productivities are not Pareto distributed, welfare gains from trade are not necessarily isomorphic between entry assumptions. Under exogenous entry, the extra adjustment in dividends dampens the relative increase in real wage as trade costs decline, resulting in lower welfare gains than under free entry.

Wage-led, debt-led growth in an open economy*

We argue that a fundamental difference between the various post-Keynesian approaches to economic growth lies in their treatment of investment. Neo-Kaleckian models, which are more appropriately Robinsonian models, postulate an investment function dependent on profitability, and that is partly autonomous from income. Some of these models rely on the importance of profitability, captured by the profit share, to make the case for profit-led growth. For their part, Kaldorian models, which are in our view compatible with Sraffian models, place the emphasis on the accelerator in the determination of investment. More importantly, since investment is a derived demand, that is, ruled by the adjustment of capacity to autonomous demand, there is a tendency to a normal level of capacity utilization. These are supermultiplier models. In our view the Kaldorian approach is better equipped to deal with some of the issues relating income distribution to accumulation with effective demand in an open economy in the long run. We develop an open economy model to examine the conditions under which an increase in real wages can produce wage-led growth, showing that the limit to wage-led expansion is a binding external constraint. The model is unique in emphasizing the role of income distribution in affecting real exchange rates, and it is through this channel that the ambiguous effects of income distribution on growth arise. We also provide some evidence indicating that real wages are positively related to growth, investment, and capacity utilization, and we highlight the role of finance in sustaining expansions suggesting that debt-led growth should not be identified with profit-led growth.

Minimum Wage and Restaurant Hygiene Violation: Evidence from Food Establishments in Seattle

We assess the effects of rise in minimum wages on hygiene violation scores in food service establishments. Using a difference-in-difference analysis on hygiene rating of food establishments in Seattle [where minimum wage increased annually between 2010 and 2013] as the treated group and from New York City [minimum wage was constant] as the control group, we find an increase in real minimum wage by $0.10 increased total hygiene violation scores by 11.45 percent. Consistent with our theoretical model, an increase in minimum wage in Seattle has no influence in more severe (red) violations, and a significant increase in less severe (blue) violations. Our findings are consistent while using an alternate control group - Bellevue City, King County, located near Seattle.