Report
OECD: The major mechanism to replace wages by debt
In OECD countries, wages have been weakened by the skewing of income distribution in favour of profits and at the expense of employees. The weakening of wages has led to a low level of inflation, and this has made it possible for interest rates to remain much lower than the growth rate. Lastly, this low level of interest rates has enabled a rise in debt ratios, first in the private sector and then in the public sector. This is how growth has been maintained, by replacing wages - which have been weakened - by debt through an ingenious mechanism: since wage increases are small, inflation - and therefore interest rates - can be low, which makes it possible for the debt to grow. It is possible that the equilibrium where wages were higher and debt was lower would have been preferable; the current equilibrium is actually inefficient (uselessly high profitability, high debt level).
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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