The Financial Express

The real wage debate

| Updated: August 14, 2022 22:38:26

The real wage debate

Honest ordinary citizens prefer as uncomplicated a life as is possible. Consciously or otherwise put together balanced monthly budgets play a major role in that equation. Expectations from governments are the wherewithal of providing that balance, preferably with a little extra to tide over rainy days. Having jettisoned carefully accumulated savings over the past two years, citizens look to the government for individual bailout. On their parts, governments always budget for the unexpected. As is being sadly obvious, over-ambition and resultant pot-holed policies override the best of state forecasts for unexpected expenses. The argument on the surface is of bruising economic impact of the pandemic. Below that lies a complex inter-connected spider's web of discord between demand and supply and unscrupulous profiteering.

Businesses have adapted with cynical efficiency. The Organisation of Petroleum Exporting Countries (OPEC) took the twin-pronged attack on its chin. A growing concern and demand to reduce dependence on fossil fuels for combating the climate change and subdued demands during the pandemic have impacted revenues. Renewables, that pleasing buzzword, didn't impress India, Russia and China when it came to treading on the toes of coal extraction. Cometh the Ukraine conflict and whatever was hemmed and hewed at the COP26 has spilled out in the open. Europe, fast being starved of gas exports by Russia, scrambled to restart nuclear power plants in spite of avowed declarations of moving away from them. Plans, or at least the expression of will by the European Union to wean off 15 per cent of gas dependence on Russian gas raises more questions than answers. Similar is the decision to stay away from that easy evil--coal. Saudi Arabia, having painstakingly put together an economic vision precluding oil wasn't swayed by the call for sanctions. Instead there was an early meeting with Vladimir Putin to settle on the middle-course. Oil production targets were not increased even though that would have come as savings grace for the Third World countries.

Countries sworn one way or the other to COP26 have been forced to traverse different, even conflicting paths in the search for answers. The United States has brought down cost at the pumps two years ago partly by releasing its strategic stock of shale oil.

It now becomes incumbent on the G20 rather than the G7 to work out the balance between the prospects of World growth versus the dilemma of individual states. Last year pharmaceutical companies made humungous profits from selling COVID 19 vaccines. For this, only 7.0 per cent of Africa's population was inoculated. The continent's debt of $55 billion wiped a quarter of its GDP from the books. That wasn't enough to shake the tree. Only now that the United Kingdom forecasts recession staring in the face in the last quarter of the year and extending into most of next year is when frowns appeared on policymakers' foreheads. Big Pharma has not delivered on its commitment to allow production of vaccines in the Third World countries such as Bangladesh. Russia has favoured only India and China in selling fuel oil at cut-rates, going as far as to allow India to refine and re export-again at a tidy profit.

There are two broad-based struggles by governments worldwide. More affluent nations are seeking to see real wages outstrip inflation and costs. Aspiring states face the headache of income that at least matches the twin ills that plague economies. That's where increases in tax and commodity prices require microscopic attention. In the developed world wages in some sectors have increased because post-pandemic returnees to jobs have been lower than expected. Psychologically changed mindsets have seen the Great Resignation whereby employees are rethinking their priorities, including job scenarios. In the United Kingdom, the National Health Service has been plagued by the growing numbers of staff vacancies. This has forced the authorities to bend immigration and work-permit rules. Australia is looking to involve bright students as part time teachers as staff members frustrated by conditions and lack of appreciation seek other vocations. The future is so unattractive! Forecasts suggest more school enrolment and declining graduate students.

In developing countries the perennial debate over unemployment, higher studies and job creation continues. Shortage of employees in the developed world is attracting migration, usually of the brighter population. If such brain drain increases, developing nations will find it more difficult to support growth targets. Real wages put together on pragmatism, taxed in realistic tandem and supported by acceptable prices of goods is the new equation that will make or break.

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