Ralf Einert

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Studies of Economic Change

Introduction (Wage Spiral)

The public debates say that low wage ensure employment and it might be true by some means or other. But just developing countries are characterised by the fact that low wages are paid but without a low unemployment rate. Meanwhile even in Germany seams to be no limit to the bottom line. Wages per hour of 4 or 5 Euro are scandalous and do not ensure the reproduction of the workforce without any further public subsidiaries. These are in fact socialist principles. It might be possible that developing countries are developing countries because of low wages and that industrialised countries are industrialised countries because of high wages. And that is the subject of this chapter.

Business plans which are based on wage dumping have failed. No other European country than Germany has had such a stagnation of the wages in the last years.

Contrary the workforce of the developing countries with substantial economic growth is getting more and more self-confident. The people are fighting for better working conditions as well as for freedom and democracy. Their "advantage" is that they can take part at social life with only less money in their own countries. This is nearly impossible in Germany. Social disintegration of the poor is getting the standard.

It is absurd that it is said that high wages jeopardise the competitive advantages while Germany has a huge export surplus at the same time. On the other hand the idea of the evolution theory has already given the evidence that low wages and low demands lead to a stagnation which is immanent developing countries. And this requires an additional analysis of the impact of high and low wages on the economy and social structures. Consequently Germany is the international leader of the export surplus not despite but because of its high wages.

High wages lead to social disintegration and the collapse of the social structure if the hours worked are high and the economic growth is low. If hours worked are decreased high wages enable maximum welfare in a leisure-oriented society.

Low wages lead to full employment connected with poverty.

This "positive" feedback of high and low wages causes the necessity to reduce the hours worked and to increase the wages step by step. Furthermore all measures have to be undertaken which support the international competitiveness for example by investments in education and the technical and scientific research or rationalising and optimising the production processes.