“The MGI said government policy and labour market practices helped determine the ultimate extent of flat or falling incomes. “In Sweden, for example, where the government intervened to preserve jobs, market incomes fell or were flat for only 20%, while disposable income advanced for almost everyone. In the United States, government taxes and transfers turned a decline in market incomes for 81% of income segments into an increase in disposable income for nearly all households.”
The objective opinion seems to be, if governments introduced policies to preserve jobs, then the percentage of stagnant or falling wages would fall. But that’s a rather broad assumption. Governments in every developed nation implement policies to preserve jobs, and they don’t seem to be doing the trick. Why?
For a possible answer, let’s look at what wasn’t studied. Of the 200-ish countries in existence, 142 of them are considered to be “developing.” China is on that list, and you might recall that they are battling it out with the United States over who has the biggest economy in the world. Their unemployment rate is also below 6%, like a lot of other developing nations. Cambodia and Thailand are below 1%, for example.
So as economies stagnate in developed nations, economies boom in deveolping nations.
There could be many reasons for this, including exporting jobs overseas, multinational corporations solidifying a global presence, or individuals sharing ideas through telecommunication. I think a major reason, though, is the supply-demand relationship between what jobs need to be done (like those surrounding water, food, and shelter distribution) versus jobs that exist from pure excess (layers of middle management, advisory positions, or speculative careers). Some developing nations are booming because providing all the basic needs to the people is a priority, and they have little purpose for jobs that do not contribute directly to those basic needs. Wealth and middle income develop as a by-product from the amount of effort put into the greater economy, as the United States showed the world during the Industrial Revolution, and China is showing us now. It’s only after the majority of people in a given nation have their needs met before that nation is ready to produce jobs that are tuned to more niche opportunities.
So what does that mean to developed nations who might be upset about losing their wealth?
It means that perhaps the solution to falling wages isn’t to protect existing jobs, but to cultivate new ones by providing everyone with the basic needs they require to survive so that they then can follow up and develop businesses that are more in tune with the needs of the future. Spending time, effort, and money on providing food, water, shelter, and electricity goes a long way in creating stable communities, and therefore economies. If the United States and other developed nations want to vanquish stagnation, they need to stop assisting it by protecting jobs that ultimately do not add anything of value to the economy. If our priority as a species is to create a lasting future, then we can’t leave ourselves obsessed with the present.