Proceedings of Annual Paris Economics, Finance and Business Conference
7 - 8 April 2016, Espace Vocation Haussmann, Paris, France
ISBN: 978-1-925488-04-3
Deceasing Labor–Labor Exchange Rate as a Cause of
Inequality Growth
Andranik Tangian*
The inequality growth during the last quarter century is explained as
caused by a decreasing labor–labor exchange rate, i.e. devaluation of
one’s labor in exchange for other’s labor embodied in the commodities
affordable for one’s earnings. We show that the productivity growth allows
employers to compensate workers with always a lower labor equivalent,
i.e., in a sense increasingly underpay works, maintaining however an
impression of fair pay due to an increasing purchasing power of earnings.
This conclusion is based on the OECD 1990–2014 data for G7 countries
(Canada, France, Germany, Italy, Japan, United Kingdom and United
States) and Denmark (known for the world least inequality). Finally, it is
shown that the dependence between the degree of inequality and the
degree of decline of the labor–labor exchange rate is statistically highly
significant.
JEL Codes:D31, D63, E31, E64, J24, J3 and O47
*Prof. Dr. Andranik Tangian. Institute of Economic and Social Research in the Hans-Böckler-Foundation,
Düsseldorf, Germany. Email: andranik-tangian@boeckler.de