Ralf Einert

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Studies of Economic Change


An unspecific discomfort with the social structures which are characterised by a high unemployment rate and an increasing inequality was motivation to show in 9 chapters the evidence that the wage have to be high and the working hours have to be low.

The chapters were the following

1. the assumption to analyse the equation of the gross domestic product,
2. the analysis of the demographic development in respect of the labour force participation,
3. the forecast and variation of the unemployment rate and hours worked,
4. the determination of the conditions of the occurrence of the society's worst case,
5. the illustration of declining growth rates by using the economic life cycle,
6. the feedback processes of high and low wages with ...
7. the impact of wages on the markets for labour and goods and ...
8. the reason why the "labour market" is not a market and finally ...
9. the causes of the increasing inequality in the economic life cycle.

Each chapter contains

1. an INTRODUCTION and an outline of the problem,
2. the derivation of the hypothesis and statements in detail,
3. a SUMMARY of the results as an illustration and
4. the CONSEQUENCES for the practical actions.

The result:

The fact that the economic growth is determined by the "law" of diminishing marginal utility and the labour productivity is determined by the idea of the evolution theory show that the hours worked, unemployment and wage dumping are the main variables. As unemployment and wage dumping cannot be accepted as a solution of the social problems only the reduction of the hours worked is left. It might be possible that the demographic development solves the problem of unemployment or might be a problem by itself. This is false: By increasing the share of the labour force participation of the age group of the 15 to 65 year olds the share of the working people related to the population can remain on nearly the same level. Only this relation is relevant to secure the social systems resp. the financing of the retirement pays. So the demography is not a problem - the retirement pays are secure.

Without any efforts to increase the labour force participation for example by reducing the hours worked it is expected that the unemployment is in 2030 at the same level as today even by the fact that the demographic change will have come to a preliminary end since then. Until then the unemployment rate is in danger to exceed a critical barrier which ensures social stability. We will see if social exclusion of unemployed and additional psychological repressions and sanctions suffice to force further social and wage dumping which is then a necessity to maintain the order of the society. The reduction of the hours worked by at least 5 hours a week is needed to avoid the worst case for sure.

Decreasing economic growth rates and according to the international competition increasing productivity rates are the cause of the decline of former industrial nations to the second or third league. At the same time the conditions of the developing countries increase substantially concerning income and employment. Once they are expected to overtake the still industrialised countries if there is no change of perspective to establish sustainability:

High wages enable high wages,
high wages lead furthermore to the
maximum welfare of a leisure-time society.

Low wages enforce low wages,
low wages lead furthermore to
impoverishment with full employment.

A study of the impact of high and low wages on the demand for goods and labour has the same result by looking from another perspective. A substantial increase of efficiency is a precondition for the positive wage spiral as high demands caused by high wages refer to the idea of the evolution theory. The increase of efficiency is not only a result of high demands but furthermore a necessity to compete within the globalisation of the world economy. Rationalising and outsourcing is at the time the reason for the increase of the unemployment rate and wage dumping. By that humans are systematically excluded from the use of the social structure. And they are a factor of production as well as we have seen. But the social structures are sustained by all members of the society.


Wage dumping and poverty are the necessary condition for wealth.
Therefore the absorption of high income is according to their origin and reason.

After this theoretical analysis practical consequences are deduced from. This is the shift from theory to practice. The consequences are filtered and focused pragmatically. As the focus the "Studies of Economic Change" is the foundation of the theoretical concept the following remarks are kept short.

The procedure contains

1. the deduction of the practical consequences of each chapter,
2. the analysis and summary of the consequences,
3. the reformulation of the consequences as a system of goals,
4. the identification of conflicts of goals,
5. the deduction of measures to achieve to goals and to avoid the conflicts,
6. the specification of the measures and finally
7. the plausibility check and the proof of the achievements.

The goals which are derived by the studies are

1. the reduction of hours worked,
2. the increase of the wages per hour and
3. the introduction of a basic income (and minimum wages).

But there are conflicts of goals as well

1. the loss of income caused by the reduction of the hours worked,
2. the loss of company profits by the increase of the wages per hour and
3. the increase of the public spending by the introduction of a basic income.

The proposed measures have therefore to achieve the goals and to avoid the conflicts:

1. The link of the employer's share to the national insurance to the average turnover for each employer.
2. The line of the employee's share to the national insurance to the hours worked.
3. The extension of flexitime of the hours worked to increase the machine running time and the productivity.
4. The introduction of a basic income of about 50% of the average wage independent of income and property for everybody.
5. The introduction of a uniform income tax of about 50% plus contribution to the national insurance.
6. The replacement of the retirement pays by the basic income plus private care.
7. The increase of the inheritance tax to finance the basic income (because to inherit is not conducive to perform).
8. The increase of the eco tax to finance the basic income.
9. The increase of the property tax to finance the basic income.
10. The reduction of the bureaucracy as side effect to finance the basic income.

The main purpose is not to present the measures but to show how to deduce the evidence that the working hours have to be reduced, that the wages have to be increased, and that a basic income has to be introduced because of the declining economic growth rates and the increasing labour productivity. It should be up to you to think about measures to comply with these necessities.

Please feel free to read this last chapter about the goals and conflicts and the deduced proposed measures.

Please feel free to look for alternative solutions and measures.