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Banks, debts and workers

Author

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  • Oliver Denk
  • Priscilla Fialho

Abstract

Private debt owed to banks and other financial institutions has been at unprecedented high levels. This paper studies the role of these high levels of debt for workers, based on an assembled micro-dataset that harmonises household surveys from 29 OECD countries. High debt is found to be associated with two bad outcomes for workers: weaker wage growth and an increased risk that they encounter a sharp fall in their wages. People who tend to be particularly affected are the low-skilled, individuals with unstable employment paths and financially vulnerable households. Strong bank supervision and macroprudential measures that aim to avoid credit overexpansion are two policies that can improve the links of private debt with labour income growth and risk. Overall, the evidence in this paper points to finance as one factor behind wage stagnation and the social divisions in today’s labour markets.

Suggested Citation

  • Oliver Denk & Priscilla Fialho, 2020. "Banks, debts and workers," OECD Economics Department Working Papers 1640, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1640-en
    DOI: 10.1787/89ebdce7-en
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    More about this item

    Keywords

    credit; finance; income growth; income risk; labour earnings;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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