Jul 10, 2017

G20 heads in the sand on the big global issue: wage stagnation

The G20 ignored the single biggest economic and political issue across the developed world - persistent wage stagnation. But voters won't put up with it, write Glenn Dyer and Bernard Keane.

In terms of positive outcomes, the G20 is a pointless talkfest. It was important when the world faced the real threat of a depression as the global financial crisis unfolded and co-ordinated action was required, but since then it has gone the way of other major talkfests like the G7 and the APEC summit. The substantive action is on the sidelines, in bilateral meetings. Politicians and the media who accompany them, however, have to portray the get-together as a major achievement, so we were treated to a dutiful series of stories this morning about various wins for Malcolm Turnbull. 

Like other summits, however, what the G20 is good for is to illustrate negative outcomes — what didn’t get agreed, what didn’t get mentioned, what words were omitted from the all-important communique (laboriously workshopped over weeks beforehand by bureaucrats). Much of the focus of the weekend G20 was of course on Donald Trump and the growing isolation of the United States under his, erm, stewardship.

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14 thoughts on “G20 heads in the sand on the big global issue: wage stagnation

  1. Michael

    Wage stagnation seems to have coincided with globalization of lower-skilled and automated jobs, and the acceleration from ‘hard’ goods to services. Our low-paid jobs have gone to even-lower-paid countries where the jobs are considered high-paid. Global businesses have squeezed the profits of traditional businesses (and generated no/minimal profits themselves or have accumulated super-profits in low-tax countries). There is no turning back. The ‘economic problem’ we studied in high school (‘what’, ‘how’ and ‘for whom’) has skewed globally. In the past, workers tended to be employed in a business that made products that the employee themselves could not afford (hence special prices and finance for workers in car factories) but there WERE customers in the same location who COULD afford to buy the product (i.e. a local market in the same community). This model has now gone global: workers (and robots) in developing countries build products for middle-class customers in developed countries, who can only afford them by generating incomes from designing, marketing or financing those products. We have so many ‘excess’ workers in developed countries that there is no upward pressure on wages. Hard to see how this changing anytime soon. Indeed, when automation moves up the income scale (as is predicted, with AI and the like), there are going to be a lot of smart but angry people around, with accumulated university debt and no prospect for repayment – all they will have, is their sense of entitlement and betrayal.

    1. Malcolm Street

      Alan Kohler on last night’s ABC News Finance section had an interesting graph that productivity growth in developed countries has dropped dramatically since 2005 compared to the period from 1990 to 2004, and no-one knows why. This would contribute as well. My guess is that it’s to do with manufacturing going off-shore (particularly to China) and the developed economies increasingly being dominated by services, where productivity gains are harder to measure and/or achieve. IMHO you could get away with the profits share of the economy increasing as long as productivity gains allowed enough profit to still raise real wages, but not any more.

  2. klewso

    But to address it would mean actually biting into company/sponsor profits??????
    Fat chance that.

    1. Barbara Haan

      You’re right again Kiewso. Might as well piss into the wind in the hope that will ever happen.

  3. Will

    Bernard says, “the longer governments and companies try to ignore [global voter anger at wage stagnation] and hope it will just magically go away, the worse it’s going to get.”

    This statement overlooks that neoliberalism is more than just a self-harming economic doctrine, but equally a political programme to delegitimise government action to correct for that harm. The problem then is not, as Bernard says here, that the Turnbull government is acting “at the behest of business” – and hence that business just needs to wise up to the damage wage stagnation (with government support) is doing to its customers. Rather, the problem is that neoliberalism has successfully sold Western voters on the lie that government by definition harms business. (We hear echoes of this every time Bernard castigating political parties for facilitating ‘protectionism’, as if the opposite were always ideal.) Jettisoning neoliberalism will take restoring a view of government as properly an instrument of the popular will, rather than the elites’ instrument of technocratic management that it is currently reduced to. Bernard’s newfound critique of neoliberalism still has some way to go.

    1. Malcolm Street

      “Jettisoning neoliberalism will take restoring a view of government as properly an instrument of the popular will, rather than the elites’ instrument of technocratic management that it is currently reduced to. ”
      Which is what propelled Corbyn into Labour leadership in the UK

  4. Tony Syad

    The Western world has militarized its police forces – allegedly because of alleged terrorists. This will serve well in those countries in which the oppressed workers stand up for human rights.
    It has been a while since a developed country had a revolution (a turning). The next decade should indeed be revolutionary in many ways.

    1. AR

      Unfortunately it has always been found that it is cheap to hire enough of the dispossessed underclass to oppress their fellows and protect the paymasters.
      As noted by Jay Gould, the 19thC US rail robber baron.
      In the future, the main jobs will be security, sex & senility services.
      Reasons to be cheerful, Part I… errr, that’s all Folks.

  5. klewso

    The problem then is that the worker will have to be squeezed even tighter until the powers-that-be realise they’re wrong – or are thrown out – in the mean-time it won’t be those insulated powers that will suffer.
    So “Bend over and assume the position” – we know the routine.

  6. Iskandar

    Not so much heads in the sand as hermetically sealed off in the bubble of the G20 conference venues, while out on the streets, if news reports are correct, a hundred thousand demonstrators were setting the town on fire. That was the real story. The peasants are revolting. Oh sure, we got a lot of news coverage of the violence and vandalism, but nothing of the underlying angry message, which I surmise was pretty much along the lines of what GD and BK covered in this piece. Good onya GD and BK, as once again, our mainstream media has failed us.

  7. bref

    Yes, there are interesting times ahead. Within just a few years AI will start to take over from truck & taxi drivers, secretaries, accountants, paralegals, law clerks and as time goes on lawyers themselves. Who know what other professions will suffer from automation. No doubt some new jobs will emerge, but in a couple of decades millions of people will be un or underemployed.
    Our politicians have shown scant regard for the automation tsunami coming at us. They happily support big business in getting rid of unions and give tax benefits for investment in robotics. Hell, they’re giving business massive tax cuts just for the hell of it at the moment, still thinking the benefits are miraculously going to trickle down to the rest of us!
    How long before our smug geriatric business ‘leaders’ are going to realise that millions of out of work people are not going to have money to buy their products. How long before hordes of angry poor people start protesting and rioting, because sure as eggs thats whats going to happen if things don’t change.

    1. John Hall

      How long before AI’s decide they don’t need their ‘masters’? Now that would be a revolution.

      1. bref

        I think long before that, the hoi polloi will decide they don’t need their masters, you know, the ever more wealthy ‘leaders’ of industry.

  8. AR

    Good to see the Drumpfster way out on the outer and looking so happy – just a bit odd that it is the left.
    Although, he is to Merkel’s right.
    Anyway the face is charm.

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