The significant consequences of the choice to weaken employees’ bargaining power in OECD countries

From the late 1990s, OECD countries chose to conduct a labour market policy based on increased flexibility and deregulation that led to a reduction in employees’ bargaining power and a skewing of income distribution at the expense of employees. This choice has had considerable consequences for OECD countries’ economies: By leading to small wage increases, it has led to a low level of inflation, and therefore to persistently expansionary monetary policies with low interest rates; As interest rates remain low, it is possible to conduct highly expansionary fiscal policies that lead to rising public debt ratios and that offset the weak growth in real wage growth; high debt is actually not a problem when real interest rates are very low; The small increase in labour costs has enabled competition authorities to let corporate concentration and dominant positions reappear, which has not led to rising prices despite the increase in profit margins thanks to the small wage increases. Corporate concentration is driven by low interest rates that make acquisitions easier and lead to a higher valuation of dominant companies; The low level of interest rates weakens banks and leads to disintermediation of corporate financing. The decline in empl oyees’ bargaining power has therefore led to a number of dangerous developments: increase in the public debt, abnormally low interest rates, but a risk of a debt crisis if real interest rates rise again, excess liquidity, need to use macroprudential policies to prevent financial instability when in reality these policies are rarely used, increased corporate concentration and monopoly rents, weakening of banks . Perhaps it would have been better not to reduce employees’ bargaining power .