What the US minimum wage hike means for markets

Congress voted to raise the US minimum wage for the first time in ten years this month. Economist Stephen Roach sees it as an important milestone in the transition from a pro-capital to pro-labour climate.

By a vote of 315 to 116, the US House of Representatives has overwhelmingly approved a two-year 41% increase in America's minimum wage - the first change in the pay floor in 10 years. The bill is likely to pass the Senate and be signed into law by President Bush. This is only the beginning of what could well be a major pro-labour swing in the US political pendulum. But there is an important twist to labour's comeback: Lacking in bargaining power in the face of an increasingly powerful global labour arbitrage, American workers are in no position to take action on their own. Instead, they have put pressure on their elected proxies to do the bidding for them. This pattern is global in scope. It is likely to be a significant feature of the coming swing in the pendulum of economic power from capital to labour.

How labour lost its bargaining power

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