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

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GMBA6008 Macroeconomics for Manager - Low Growth
of Wage Share Household Debt and Financial
Fragility - Economics Essay Writing Assessment
Answer
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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.
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Research Essay - Assignment Two TopicsLow
growth of wage share, household debt and
financial fragilityThe 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.
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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 overhangquot 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.
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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 Lowes 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 payquot.
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.
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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.
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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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