Wage and consumption relationship

Wages and consumption moved responsively during to fordist era. Based on mass production and mass consumption point of view, increases in wages stimulated aggregate demand. Throughout the thirty years process, sustainable and inclusive growth had been ensured. Accompanied by globalization, wage share in aggregate income has decreased. Increasing financial activities, weakening labour market institutions, technological developments, latest manufacturing processes and company structures constitute the basic reasons of this downward trend. Because of the marginal propensity to consume out of wage income higher than that out of capital income, it is supposed that decrease in wages will have adverse effects on total consumption expenditure. Furthermore, depending upon the changes in labour demand, inequality between qualified and underqualified labour is rising rapidly. To find solutions to these problems, consumption expenditures were supported through financial markets. Thus bringing the balance between wages and consumption during the previous period to end. In this context, increasing indebtedness, inequality and poverty, unsustainable growth and finally more frequent and more detrimental crises came to fore. In the first chapter of this study, theoretical framework is introduced and terms are defined. In the second chapter, reasons for the asymmetry between wages and consumption in the globalizing world are revealed. Finally in the third chapter, the implications of this asymmetry for labour markets and national economies are going to be investigated. Keywords: wage, consumption, economic growth, financialization, indebtedness, inequality, poverty and crises