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Wage-led growth: an introduction

Research output: Working paper/PreprintDiscussion paper

Original languageEnglish
Published1 Jul 2011

Bibliographical note

The paper is part of the project ?New perspectives on wages and economic growth: the potentials of wage-led growth?. Section 2 builds on joint work with Marc Lavoie. An earlier version of this paper had been presented at the workshop ?Wages and Economic Recovery?, May 2011 at the ILO


King's Authors


The past decades have witnessed falling wage shares and a polarization of personal income distribution. Average wages and average labour compensation have not kept up with productivity growth. Functional income distribution has shifted at the expense of labour. In many countries personal income distribution has also become more unequal. By many measures income inequality is worse than at any time in the 20th century. At the same time economic growth processes have become imbalanced. Financial crises have become more frequent; household debts have risen sharply; international imbalances have increased, with some countries relying excessively on export growth. This paper argues that the polarization of income distribution and the decline in the wage share play an important role in the generation of imbalanced and unequal growth, and that a pro-labour wage policy will form an important part of a policy package that generates a stable growth regime. A wage-led growth strategy is thus advocated.

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