Strange concerns about Western workers

In: Uncategorized

26 Jan 2007

Many of the world’s elite gathered in Davos this week for the World Economic Forum expressed strange concerns for the stagnating wages of Western workers. According to articles in the Guardian and the Wall Street Journal (25 January, subscription required) they are worried that the rise of China and India will hit developed country wages. Its unusual for Western leaders and thinkers to concern themselves with poor wage rates for ordinary people. It is hard to resist the conclusion that their real concern is the competition from the emerging Asian powers. Protectionist conclusions could easily be drawn.

For the record those quoted as being concerned about Western wages were Stephen Roach of Morgan Stanley, Robert Shiller of Yale and Laura Tyson of the London Business School (and former senior Clinton administration official). In contrast, Ken Rogoff of Harvard argued that changing technology and trade patterns were reducing the demand for unskilled workers.

A similar discussion was aired in last week’s Economist (see 20 January dispatch). Previously former Clinton administration officials such as Larry Summers and Robert Rubin have expressed support for the wage stagnation line (see, for example, the Financial Times on 25 July 2006 on their presentations at a Brookings Institution conference). Paul Krugman of Princeton has also criticised rising inequality in America in his New York Times column. In contrast, Jagdish Bhagwati of Columbia argued a similar case to Rogoff in the Financial Times on 4 January while the Cato Institute, which this month had an event on American income inequality, generally takes a free market line.