29 Oct 2017

Armine Yalnizyan: wage stagnation and corporate titans

From Sunday Morning, 8:35 am on 29 October 2017

Armine Yalnizyan is a Canadian economist known for presenting an alternative analysis of economics.

She, like many other economists analysing the small government, market-led ethos of the past 30 years, says income as a proportion of national economic cake has been going steadily backwards.

This has led to a collapse in household spending, one of the main drivers of any domestic economy. Meanwhile the proportion of income accruing to assets has increased, leading to worsening inequality in many countries.

She has five ideas to reduce inequality: Don't make things worse, boost the economy from the bottom up, tax. it's not a four-letter word, support the sagging middle and shift happens, be part of the culture change.

The situation we find ourselves in today closely resembles that of 100 years ago, Yalnizyan says.

Canadian economist Armine Yalnizyan.

Canadian economist Armine Yalnizyan. Photo: Supplied

"These globe-straddling corporate titans are very difficult to regulate.

"We have this very unusual situation here where corporations are gaining in strength for a host of reasons, similar to the type of corporate power 100 years ago, in key sectors of the economy with less ability to either tax a proportion of the profits they make or regulate their activities."

These global corporates prioritise shareholder interests over all others, she says.

"What we have seen in this unfettered pursuit of growth and rent extraction which is accelerating in an era of slow growth. Globally you're looking at new ways of extracting rent so you can satisfy your shareholders - we're seeing this form of capitalism that looks an awful lot like it did 100 years ago."

And wages have been stagnant across the western world, particularly in the US the UK, Canada and New Zealand.

"Labour's share of the economy has been dropping for the last 30 years, while the profit share of income has been rising and we've seen within the labour market increased inequality as we enter the long period of slow growth that has gripped the global economy."

Yalnizyan says the provision of key services for free, or cheaply, can massively boost middle-class spending power.

"Better access to tertiary education throughout your life so you can reskill and get back into the labour market and take care of yourself.

"Better access to childcare as more and more households are relying on two incomes to get in and stay in the middle class.

"And housing is the biggest bite out of any household budget, the cost of shelter is throughout the entire income spectrum, affordable housing puts more disposable income in people's pockets."

This kind of social wage she says will help support the "sagging middle".

"It basically says 'we've got your back, it doesn't matter how your income varies, your access to health and education is covered'."

Boosting the minimum wage is also stimulatory as poorer people spend what's in their pockets.

"Those at the bottom of the income spectrum spend everything they earn, those at the top earn enough to be able to save. When you raise the minimum wage, people spend everything that they earn and they tend to spend it in the local economy."

Fears of wage inflation driven by raising the minimum wage are misplaced, she says.

"Bargaining power has been dramatically reduced in the last 30 years, we have not seen generalised wage inflation; we have seen wage compression."

Armine Yalnizyan is the president of the Canadian Association for Business Economics and is to speak about the future of work and the role of businesses and the state in creating a more equal future. She has been a guest at the Council of Trade Unions biennial conference.

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