UK and other advanced economies productivity and income inequality

The focus of this contribution is on weak productivity growth, in the UK and other advanced economies, which has been slowing down ever since around 2000, and on increasing income inequality; both of which have been caused by a number of factors, including ‘secular stagnation’. Actually, recent evidence clearly suggests that labour productivity and income inequality have been closely and significantly related; this is so since there is a strong relationship between productivity, inequality, economic growth and real wages. Productivity growth is the key determinant of how demand can grow without inflation, thereby reducing inequality of income. The slowdown in productivity growth and increase in inequality have been in evidence in the UK and other advanced economies. Indeed, they have become more pronounced following the Global Financial Crisis. It is the case that although weak productivity growth and increased income inequality predate the Global Financial Crisis, and the Great Recession, they have clearly worsened following them.