Demand, Production, and the Determinants of Distribution: A Caveat on “Wage-Led Growth”

The incomes of workers and capitalists pertain to different moments of accumulation. Wages are shares of capital outlays sustaining production; profits are shares of commodity sales. If aggregate demand and the scale of productive undertakings are shaped with a measure of mutual autonomy, the class distribution of income and the measure of economic activity are jointly determined by the same processes. In those settings “wage-led growth” has neither analytical nor policy purchase as associations between wage shares and levels of output (or growth) are confounded consequences of distinct effects on each measure of broader developments in the economy. A more appropriate dichotomy is that between “investment-led” and “consumption-led” growth, with the former resulting in comparatively higher wage shares. After advancing and illustrating these points, this paper motivates its approach to class income flows and the role of demand--which draw on the Circuit of Capital--in relation to the equivalent Kaleckian approaches sustaining arguments for “wage-led growth.”