Join our community of smart investors

Biden goes back to the 50s

Pro-worker economic policies have been good for shareholders in the past. But they might not be so good now
Biden goes back to the 50s

Is what’s good for workers also good for shareholders? The fate of the US economy and stock market rests upon this question.

“It’s time to grow the economy from the bottom up,” says President Joe Biden. On top of the recent stimulus package, he’s proposing stronger trades union rights; increased tax credits for the low paid; a higher minimum wage; and the creation of lower-skilled jobs to improve infrastructure and to fight climate change financed by higher taxes on the well-off.

To investors used to decades of pro-rich policies, this seems scary. But it need not be so bad. Economists such as Marc Lavoie at the University of Ottawa and Engelbert Stockhammer at Kingston University have shown that worker-friendly measures – what economists call wage-led growth – like these can actually boost profit rates. Because workers tend to spend more of their income than billionaires, transferring cash to them can boost demand. Better still, the assurance of high demand can encourage companies to invest more. And the prospect of rising wages should incentivise them to invest in labour-saving technologies – things that can boost productivity.

To continue reading...
Register for free
Read 3 articles for free each month
Have an account? Sign in