I only look at Ross Gittins to find out just how far off the beam economists are, and once again he does not disappoint: Now we’re trying Plan C to end wage stagnation:
It’s a tacit acceptance of an obvious point many economists (and I) have been making for ages, but the government and its advisers haven’t been prepared to acknowledge: since consumer spending accounts for well over half of gross domestic product, and growth in wages is the chief source of growth in household incomes, without real growth in wages economic recovery simply isn’t sustainable.
The key to rising real wages is rising value added per employed person (ie higher productivity). That many economists (including Ross) think buying things will create value only shows to go you what a primitive subject economic theory remains. Come and see the billion dollar station they are building at the Shrine of Remembrance in Melbourne to see why real wages are going nowhere. If you build what no one is going to buy – a government speciality – you will not only fail to create growth you will diminish it.
Why isn’t that obvious? And it won’t matter a bit whether every single worker on every single project spends all of their income to the last dollar.