Studies of Economic Change

Maximum social welfare caused by high wages?

1. Labour demand 2:
   The impact of high demand based on high wages on the innovation rates according to the idea of the evolution theory leads to an increase of the demand for goods (1). In order to comply with the additional demand for goods more staff is needed. This means that an additional demand for labour (2) arises.
2. Labour demand 1 plus labour demand 2:
   According to the labour demand two effects are overlaying: The decreased labour demand (1) caused by high wages is added to the increased labour demand (2) caused by innovations due to high wages. Both effects lead to an expected but only slight decrease of the labour demand (3).
3. Good demand 1 plus good demand 2:
   According to the good demand two effects are overlaying: The increased good demand (1) caused by an increased innovation rate is added to the decreased good demand (2) caused by a decline of the purchasing power. Both effects are expected to have the same level so that the good demand (3) remains the same.
4. Maximum social welfare:
   Innovations contribute to avoid an economic decline in industrialised countries. But due to a higher level of efficiency the demand for labour decreases. The same amount of goods and services is produced by increasingly fewer people. Maximum welfare in a leisure-oriented society is a possible option.
5. Assumed solutions:
   The effects of cost savings and an decreased additional utility is considered as a result of high wages in the view of the public opinion. Consequently the actual economic measures which are based on the equilibrium theories seam to solve the social problems. But this is an illusion.
6. Mix up of savings with labour demand 1:
   The fact is that the decreased labour demand (3) caused by a decreased marginal utility and cost savings due to increased innovation rates are mixed up with a decreased labour demand caused by high wages.
   The consequences are misinterpretations and assumed solutions which are false.