There is of course another interpretation of falling wages…a decline in the investment in human capital.. a part of secular stagnation

More and more people are talking about declining real and nominal wage growth and more and more people are asking when is wage growth going to pick up. 

It is a very good point.  But I think we need to look at the dynamics of wage growth from another perspective.   This perspective is that of human capital investment: wages are an investment in human capital and you pay more when you want to invest/upgrade/increase productivity etc.  If you expect to grow and you expect to depend on investment in human capital to grow, you will invest more, and one indicator of this investment is wages.

Now, we know that capital investment as a % of GDP has been declining for some time and we also know that corporations have been buying back shares and borrowing money to do so.  But these three (wages, capex, buybacks) all look to me to be pretty synchronised.

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It looks pretty much as if corporations are adjusting to lower long term economic growth either as a consequence of lower wage growth, less investment or some other natural dynamic —productivity/TFP or demographic dynamic.  Of those who discuss the issue of secular stagnation many point to the 1980s as the starting point and the trends noted above would fit into this timeframe‚Ķ.

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