Lower wages and reduced union membership lead to lower GDP

cepheus

It seems that lower union membership doesn't only lead to economic inequality, but also reduces GDP, so the nation as a whole suffers.

For every 1% reduction in the share of national income going to wages, UK national income – measured by GDP – is reduced by 0.13%....the decline in union density, from its peak in 1975 to today, has reduced UK GDP by up to 1.6% – a significant and permanent loss. Restoring union density to the levels seen in the early 1980s would, thanks to the impact on the wage share, add £27.2bn to UK GDP.

WRITTEN BY:
Alice Martin, Researcher, Economy & Finance
James Meadway, Chief Economist
Professor Ozlem Onaran, University of Greenwich
Alexander Guschanski, University of Greenwich

http://www.neweconomics.org/publications/entry/working-for-the-economy.

Thrugelmir

cepheus wrote: »

It seems that lower union membership doesn't only lead to economic inequality, but also reduces GDP, so the nation as a whole suffers.

If you can explain to me what the Union rep does in our organisation all day I'd be most interested.

:rotfl::rotfl::rotfl::rotfl::rotfl:

kinger101

Oh dear. University professors who don't know the difference between correlation and causation. Personally I think the decline in GDP is due to raisins being removed from Double Decker bars.

princeofpounds

University professors who don't know the difference between correlation and causation. Personally I think the decline in GDP is due to raisins being removed from Double Decker bars.

Indeed.


I think I need a 100k grant to run a two year program to research the double decker / double dip hypothesis.

michaels

I can see the argument that in the short run if the share of the lower paid and labour in general is increased and the share of the highest paid and capital correspondingly reduced then there will be a consumption effect increasing aggregate demand and thus gdp. However longer term it will lead to lower saving and investment so the overall economic consequence must be ambiguous.

cepheus

kinger101 wrote: »

Oh dear. University professors who don't know the difference between correlation and causation. Personally I think the decline in GDP is due to raisins being removed from Double Decker bars.

Actually academics are constantly aware of this issue, are challenged on it, and have to account for it, as you would have known if had read the report.

In contrast to Piketty’s core argument, however, the research presented here suggests a different relationship. As the wage share has fallen, this has led to lower growth – not that lower growth has provoked a falling wage share of income.

http://b.3cdn.net/nefoundation/5237986e74dd1368f5_51m6b4u2z.pdf

More commonly it's used as an excuse by the arrogant and prejudiced to dismiss findings which don't support their selfish interests. It's an often used tactic to dismiss Climate change for example.

CLAPTON

cepheus wrote: »

Actually academics are constantly aware of this issue, are challenged on it, and have to account for it, as you would have known if had read the report.



http://b.3cdn.net/nefoundation/5237986e74dd1368f5_51m6b4u2z.pdf

More commonly it's used as an excuse by the arrogant and prejudiced to dismiss findings which don't support their selfish interests. It's an often used tactic to dismiss Climate change for example.

do all studies show this causal link?
if not, which ones do you think are the better studies?

kinger101

cepheus wrote: »

Actually academics are constantly aware of this issue, are challenged on it, and have to account for it, as you would have known if had read the report.



http://b.3cdn.net/nefoundation/5237986e74dd1368f5_51m6b4u2z.pdf

More commonly it's used as an excuse by the arrogant and prejudiced to dismiss findings which don't support their selfish interests. It's an often used tactic to dismiss Climate change for example.

Nothing you have posted indicates they've addressed correlation versus causation. Economics is not a science. This document hasn't even been peer reviewed. Actually, my original assessment was far too charitable. They've not even demonstrated correlation as there is no statistical analysis of the data.

The comparison with climate change denial is inaccurate. Climate change is based an a falsifiable hypothesis, and a scientific consensus across multiple disciplines.

BobQ

While some inequality can increase efficiency by strengthening incentives to work and invest, recent research suggests that higher inequality is associated with lower and less sustainable growth in the medium run (Berg and Ostry, 2011; Berg, Ostry, and Zettelmeyer, 2012), even in advanced economies (OECD, 2014)

http://www.imf.org/external/pubs/ft/fandd/2015/03/jaumotte.htm