Wage growth

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Wage growth (or real wage growth) is a rise of wage adjusted for inflations, often expressed in percentage.^[1] In macroeconomics, wage growth is one of the main indications to measure economic growth for a long-term since it reflects the consumer's purchasing power in the economy as well as the level of living standards.^[2] An increase in wage growth implies price inflation in the economy while a low wage growth indicates deflation that needs artificial interferences such as through fiscal policies by federal/state government. Minimum wage law is often introduced to increase wage growth by stimulating Price Inflations from corresponding purchasing powers in the economy.^[3] Wage growth can also be maximised through the development of industry factors by investing skilled workers in which decision made by businesses.^[4] More financial compensation for skilled workers not only lifts wage growth but stimulates higher market prices in the economy.

While a weak productivity influences a low wage growth, identified a long-term factor, a short-term problem for low wage growth is often identified as the spare capacity in the Labour Market.^[4] By the lower unemployment rate given by the more opportunities from the spare capacity in the labour market creates less competitiveness among the labours, which reduces wage growth.^[4] To achieve consistent strong wage growth and sustainable economic growth, high productivity is the key determinant.^[5] Higher labour productivity (measured by GDP per worker) stimulates price inflations in resulting in a rise in real wage growth.^[4] One of the major factors for the recent sluggish wage growth in advanced countries is caused by their lower labour productivities.^[4]