Devaluation of one's labor in labor-commodities-money-commodities-labor exchange as a cause of inequality growth

Andranick S. Tanguiane

No 86, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: The inequality growth during the last quarter century is explained as caused by a decreasing labor-labor exchange rate, i.e. devaluation of one's labor in exchange for other's labor embodied in the commodities affordable for one's earnings. We show that the productivity growth allows employers to compensate workers with always a lower labor equivalent, i.e., in a sense increasingly underpay works, maintaining however an impression of fair pay due to an increasing purchasing power of earnings. This conclusion is based on the OECD 1990-2014 data for G7 countries (Canada, France, Germany, Italy, Japan, United Kingdom and United States) and Denmark (known for the world least inequality). Finally, it is shown that the dependence between the degree of inequality and the degree of decline of the labor-labor exchange rate is statistically highly significant.

Keywords: inequality; productivity; hourly earnings; consumer prices; housing prices; labor-labor exchange rate (search for similar items in EconPapers)
JEL-codes: D31 D63 E31 E64 J24 J3 O47 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:86

DOI: 10.5445/IR/1000055423

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