Report
The vicious circle of “low-cost”
Since the second half of the 1990s, OECD countries have been characterised by: A skewing of income distribution against wage earners; A deterioration in the average quality of jobs through offshoring and destruction of manufacturing jobs. Given the small wage increases and the low-quality jobs, it is normal that household demand has moved towards low-cost products. And to drive down prices, companies have been encouraged to lower wages even more and offshore even more, leading to a further increase in demand for low-cost products and this vicious low-cost circle. How is it possible to get out of this circle ? Wage increases would shift demand toward higher-quality, more local, but more expensive goods and services; but it would have to be accepted that this policy would severely damage the situation of companies that produce low-cost goods and services.
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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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