Why Western workers are set to become poorer

What do the world's three largest economies have in common? The answer is that workers across the US, Japan and Europe are seeing barely any growth in wages, says Morgan Stanley's Stephen Roach.

What do the world's three largest economies have in common? The answer underscores one of the key tensions of globalisation unrelenting pressure on labour income. The corollary of that phenomenon is equally revealing everrising returns to the owners of capital. For a global economy in the midst of its strongest fouryear boom since the early 1970s, this tug-of-war between labour and capital is an increasingly serious source of disequilibrium. It has important economic, social, and political implications all of which could complicate the coming global rebalancing.

My recent trip to Japan was the clincher. As I found in Germany during a series of extensive visits last month, and as has been evident in the United States throughout the current upturn, Japanese labour income remains under extraordinary downward pressure. There is no way this is a coincidence. In all three economies, unemployment has been declining in recent years a 27% drop in the US jobless rate since mid-2003, a 21% decline in Japan since early 2003, and a 15% fall in the German unemployment rate since mid-2004.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Contributor

Stephen Samuel Roach is an American economist. He serves as a senior fellow at Yale University’s Jackson Institute for Global Affairs and a senior lecturer at the Yale School of Management. He was formerly chairman of Morgan Stanley Asia, and chief economist at Morgan Stanley, the New York City-based investment bank. He is the author of several books including Accidental Conflict: America, China, and the Clash of False Narratives and Unbalanced: The Codependency of America and China.