The issue of purchasing power: Three horizons

We will illustrate our analysis with the situations of the United States, the United Kingdom, France, Germany, Spain, Italy and Japan. The issue of household purchasing power is at the heart of debate in most countries today. To analyse it, we need to look at three horizons: The past (from the 1990s to today): how has purchasing power changed over time for households as a whole, and how have incomes been shared between wages and earnings (capital income)? An abnormal decline in the wage share of GDP may justify an across-the-board increase in wages today; this is the case in the United States and Japan; The present (2021-2022), given the fall in purchasing power due to the surge in inflation. This fall in purchasing power has been particularly pronounced where the degree of nominal wage indexation to prices is low, which reveals weak bargaining power among wage earners relative to companies . T his is the case in the United States, Germany and Spain; The future (2020s and 2030s), which is likely to be characterised by a sharp rise in energy prices and possibly by a continued rise in residential real estate prices. This will be a serious problem for low-income households, which spend a high share of their income on energy and housing. This raises the question of the public policies needed to prevent this impoverishment of low-income households. The rise in energy prices is already particularly pronounced in Italy and Spain; that in real estate prices in the United States and Germany.