If income distribution became favourable to employees again, the transitional period would be difficult

We look at the situations of the United States, the euro zone and Japan. The current equilibrium in these countries is consistent. The skewing of income distribution at the expense of employees has led to low inflation, which makes it possible to have low interest rates; since household demand is sluggish, an expansionary fiscal policy is needed, which is easy since interest rates are low. If the functioning of the labour market changes, this equilibrium will no longer be consistent. But if wages rise at a faster pace, it will no longer be necessary to maintain an expansionary fiscal policy. In the long term, the public debt ratio will be lower, which will make it possible to have higher interest rates. But the problem is the transitional period: the public debt is then very high, inherited from the previous equilibrium, and interest rates have become high.