Pay restraint is holding back economic recovery

Chris Wright, writing on the TUC’s Touchstone blog, argues for an economic strategy based on increasing wages to help stimulate demand: http://www.touchstoneblog.org.uk/2011/05/collective-bargaining-and-wage-driven-growth/

The premise of the article is that neo liberal responses to the economic crisis are not working. Wright makes reference to ’the failure of the Thatcherite assumption that higher corporate profits leads to increased investment, which was used to justify the active weakening of unions and strengthening of managerial prerogative’

The TUC has long recognised that wage stagnation suppresses economic demand. As Deputy General Secretary Francis O’Grady told a joint TUC/IDS conference in February:

'Stagnant wages go right to the core of Britain's economic malaise. At a time when workers are struggling with benefit cuts and tax rises, falling real wages mean suppressed demand. We face a dangerous vicious circle of weak consumer spending, sluggish demand, and a depressed economy. Without higher wages, we won't be able to break that destructive cycle.’

'Over the past three decades, the share of GDP going into workers' pay packets has been in decline. Unless this trend is reversed, we risk a repeat of the economic turmoil of recent years. Even the IMF is calling for policies that increase the share of national income going to workers.'
http://www.tuc.org.uk/economy/tuc-19147-f0.cfm