by Jerome a Paris
Thu Apr 5th, 2007 at 10:19:16 AM EST
Free trade hits income of workers, says IMF
For the first time in a significant policy document, the IMF says "labour globalisation has negatively affected the share of income going to labour in the advanced economies".
As a bonus, he IMF report
(pdf!) tells us what an "Anglo-Saxon" economy (beyond the geographical definition of US, UK, Canada and Australia) is:
An Anglo-Saxon economy is an economy that hires more people by paying them less and less, relatively speaking (the number of workers has increased faster than the pay of workers).
While that might make sense in an abstract sense (lower the price of a service - in that case, labor - to increase demand for it), it has very real consequences, easily visible on this graph, which is what brought the headline from the IMF:
A steady decline of the share of national income that goes to labor. Unsurprisingly, this trend (as shown in the case of the USA in the bottom left graph) started in 1981 - the year Reagan came to power.
But it's actually even worse than that:
This says that unskilled wages have remained stagnant in the US while they grew elsewhere, and that as a result the ratio between unskilled and skilled wages has widened. Meanwhile, the number of unskilled jobs has increased, but not that much (+20% in 25 years, vs -15% in Europe), while skilled jobs increased at the same rythm (roughly +40% in all economies over the period):
The result: while skilled labor maintained its share of overall income, unskilled labor has seen it drop.
Increasing employment in the unskilled sector only (the "Anglo-Saxon" way, according to the IMF) is apparently the best way to increase company profits.
The permanent focus on France's or Germany's unemployment numbers beg a question: is it really worse to have a few percentage points more of the working population unable to find work, or to have a whole chunk of the working population empoverished?
The freemarketistas have a clear preference; maybe it's time to ask why - or more to the point, as we know the answer very well, maybe it's time to say it loud. A struggling, empoverished workforce is good for profits, in the short term - and they have not time to complain.