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Are we about to see the return of real wage growth? (City A.M.)

    Head of Economic Research Adam Memon contributed to a City A.M. debate on 'As the squeeze shows signs of easing, are we about to see the return of real wage growth?'. 

    To read the full debate, visit the City A.M. website.

    "NO - In the long run, average wage growth is determined by average productivity growth. This means that, even with strong employment and GDP figures, resolving this decade-long weakness in productivity is the key to real wage growth. Every year since 2008 we’ve been told not to worry about productivity – that the stagnation will disappear when demand grows. Well, we’ve waited and productivity has not recovered. In fact, we’ve fallen back to 2005 levels; if productivity had continued its trend growth we would be producing 20.5 per cent more output for every hour worked. Consequently, despite the current momentum, there can be no sustainable growth in real wages without any underlying improvements in production processes. To increase productivity, we should let low-paid workers keep performance pay tax-free, enact tougher competition policy, and free our schools, universities and businesses from restrictions on investing, innovating and exporting. Adam Memon is head of economic research at the Centre for Policy Studies."

    To read the full debate, visit the City A.M. website.

    Date added: Thursday 20th February 2014