Why can improving living standards stimulate growth?

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：Freepik.com

Veronica Nilsson

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The EU's Minimum Wage Directive stipulates that member states are required to develop action plans if collective bargaining coverage falls below 80%. The European Trade Union Institute emphasizes the need for action on two fronts: first, strengthening the capacity of trade unions and employers' organizations; and second, enhancing institutional support for collective bargaining.

In its latest Economic Outlook, the OECD commented on addressing labor market shortages, stating: "Reducing employers' buyer monopoly power in the labor market would strengthen workers' bargaining power, leading to higher wages. Research by Araki et al. (2022) shows that when unions are stronger, the negative impact of labor market concentration on wages diminishes. Moreover, curtailing buyer monopoly rights can also help improve job quality." In short, employers' ability to set wages keeps wages artificially low, underscoring the need to empower workers and enhance their bargaining power in order to drive wage growth.

Improving living standards through fairer, more progressive tax policies and wage growth is, in fact, an investment in human capital—creating new sources of growth while helping to rebuild trust.

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Editor: Wang Can

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