Important new study says economy sucks because people are paid peanuts

Inequality is bad for the economy.

That’s the big take-away from a new report prepared for G20 labour and employment ministers by three global economic organizations: the United Nations’ International Labour Organization, the Organisation for Economic Co-operation and Development, and the World Bank.

“Extensive evidence shows that high levels of income inequality tend to reinforce themselves,” says the report. And this has a negative impact on “long-term growth protential.”

The report zeros in on “stagnating wage income” and a “deterioration in job quality” across advanced G20 economies, pointing to a “long-term decline” in the share of wealth in the pockets of workers:

1. Workers have seen wages stagnate and the quality of their jobs deteriorate:

2. When workers have less money in their pockets, they have to make tough decisions about what they can afford to buy, so they consume less:

3. And that stagnates growth for other businesses:

4. And lower consumption leads to a ripple effect felt throughout the economy:

5. And with less money being earned, that means less tax revenues for governments:

Bottom line: that means everyone is worse off.

Photo: uacescomm. Used under a Creative Commons BY-2.0 licence.