Causes of the crisis: wage stagnation and neoliberalism

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Chapter 5 in The Cost of Living Crisis, 2024, pp 94-109 from Edward Elgar Publishing

Abstract: While inflation is the first dimension of the cost of living crisis, wage stagnation is the second dimension. Neoliberalism (and its offshoots) is a contributory factor to both of the dimensions of the crisis. The erosion of the welfare state has forced people to allocate increasingly larger portions of stagnant wages to pay for services that once upon a time were provided by the public sector, most notably health and education. Likewise, the privatisation of utilities has forced people to allocate larger portions of tighter budgets to the payment of utility bills. Neoliberalism is the reason why a twisted tax code puts most of the burden on wage and salary earners. Financialisation and deindustrialisation, two offshoots of neoliberalism and two sides of the same coin, have led to diminishing productive capacity and the decline of manufacturing industry, making the economy unable to accommodate a demand shock.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2024
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