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Analysis: More Pressure on Global Wages Could Backfire

“(Reuters) – If rising income gaps are at least partly responsible for the global credit crisis, governments and companies should be wary of squeezing wages yet again to help rebuild their finances.

In the long buildup to the global financial crisis, households took on debt to offset the gradual fall in their incomes and consumption relative to the more wealthy.

But as they’ll get little or no help from easy credit today, driving wages down even more risks a cratering of household consumption and a severe test of social cohesion.

A renewed public focus on decades of widening wealth and wage inequality in the United States, Britain and other developed and developing economies has been one of the most durable legacies of the five-year-old credit crisis.

Work by Nobel Laureate Joseph Stiglitz’ on the 1 percent of U.S. super-rich, “Occupy” protest movements around the world and electoral swings to the left have all spotlighted what business, finance or government elites now realize they can’t ignore.”

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