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Left-wing debate on higher wages

August 11th, 2017

A left-wing political economist believes that in order to boost productivity, the state needs to intervene and boost wages. A left-wing commentator, on the other hand, fears that higher wages would increase first and foremost alcohol and tobacco consumption.

In Magyar NemzetZoltán Pogátsacalls for higher wages, arguing that economic growth and innovation require higher wages. The left-wing political economist quotes a recent paper by the Roosevelt Institute on productivity slumps and Thomas Piketty’s theory that inequality and low wages curtail technological innovation. Low wages weaken demand and disincentivize technological innovation which could boost economic output and improve productivity, Pogátsa explains. He goes on to note that politicians need to go beyond traditional neoclassical economic thinking and neoliberal dogmas – the state should intervene through large public investment projects as well as stronger redistribution, to increase wages and therefore facilitate innovation and trigger faster growth, Pogátsa concludes.

Népszava’s Miklós Bonta ponders the implications of higher wages. The left-wing columnist recalls that in the past year, wages in Hungary have increased by 15 per cent, while inflation has been only 2 per cent. The gap between the increase in wages and inflation implies lower profit for companies, Bonta points out. He suspects that companies will soon start to raise prices, hoping that consumption will also increase. Bonta, however, is rather pessimistic about consumption. He thinks that in Hungary, higher spending will boost alcohol and tobacco consumption first and foremost.

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