Banks, debts and workers

Oliver Denk and Priscilla Fialho

No 1640, OECD Economics Department Working Papers from OECD Publishing

Abstract: Private debt owed to banks and other financial institutions has been at unprecedented high levels. This paper studies the role of these high levels of debt for workers, based on an assembled micro-dataset that harmonises household surveys from 29 OECD countries. High debt is found to be associated with two bad outcomes for workers: weaker wage growth and an increased risk that they encounter a sharp fall in their wages. People who tend to be particularly affected are the low-skilled, individuals with unstable employment paths and financially vulnerable households. Strong bank supervision and macroprudential measures that aim to avoid credit overexpansion are two policies that can improve the links of private debt with labour income growth and risk. Overall, the evidence in this paper points to finance as one factor behind wage stagnation and the social divisions in today’s labour markets.

Keywords: credit; finance; income growth; income risk; labour earnings (search for similar items in EconPapers)
JEL-codes: E24 G21 G28 J31 (search for similar items in EconPapers)
Date: 2020-12-15
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1640-en

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