GMBA6008: Macroeconomics for Manager - Low Growth of Wage Share Household Debt and Financial Fragility - Economics Essay

1. GMBA6008: Macroeconomics for Manager - Low Growth of Wage Share Household Debt and Financial Fragility - Economics Essay Writing Assessment Answer

2. Type: The purpose of this assessment is for students to develop research and communication skills with macroeconomic content. Exercise questions addressing on contemporary economic issues. Assessment Criteria summary:• Structure and logic;• Analytical argument;• Accuracy of information used, referencing and argument;• Use of graphs and tables to summarise information;• Clarity of expression; and• Accurate referencing.

3. Research Essay - Assignment Two Topics:‘Low growth of wage share, household debt and financial fragility’The wage share of the gross domestic product (GDP) has fallen significantly in most OECD nations as well as most of the nations around the world during the past three decades. This trend has been well documented in one of the reports prepared by the International Labour Organization ( ILO (2012/2013) , which has revealed the dip in global wage share over the last three decades and the driving forces behind it. Data on movements in the wage share of national income is readily available for most OECD nations.

4. A very recent investigative newspaper article sheds lights on some of the factors that contributed to the smallest pay rise for the Australian workers since World War Two. Another newspaper article has argued that ‘a new types of poverty hurting Australian middle class’. & The real wage overhang" — a phrase invented to describe wages outstripping productivity growth — was a standard concept taught in economics classes, when the share of national income going to profits began to f the all relative to the share going to wages in 1970s and 1980s.

5. In short, high wages growth was seen as an economic problem. Today, it would appear that Australia has the opposite problem. Even the Reserve Bank of Australia, once the “wages cop” looking to curtail pay rises, is advocating for higher pay, which is evident from Reserve Banks boss Philip Lowe’s recent speech. How times have changed. Today, the wage-price spiral is dead and gone and the economy is facing what the Reserve Bank governor calls & a crisis of low pay". The wage price index, the most reliable indicator of labour costs, is at a record low. The profit share of national income is soaring, while the share going to workers is equal to the lowest level since the Second World War.

6. Low pay is dragging on economic growth and the stagnation of wages sits uneasily with record household debt levels, creating concerns about what might happen when interest rates begin to rise. Although the Reserve Bank has denied that wages stagnation threatens financial stability, echoing with the mainstream macroeconomic views that argues the wage shift had clear and significant benefits in the economic growth and price stability in last three decades.

7. However, some experts around the globe, believe it is a concern. There is ample research suggesting that, & Wages stagnation [is] contributing greatly to rising financial fragility”. Some of Australia& leading labour market analysts warn wages stagnation is undermining financial stability and social cohesion and there is no improvement in sight, see here and here.

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