Losing Unequally: Financialisation, Productivity and the Finance Wage Premium

ABSTRACT This paper provides an expanded analytical framework on the effects of financialisation on the finance wage premium. Current analyses focus on how financial deregulation has increased employee compensation in the financial sectors via rent‐sharing. We argue that rising financial payments—the source of financial rents—also induce wage suppression in the rest of the economy. First, nonfinancial corporations pass increases in their financial payments to workers through wage reductions. Second, simultaneously, indebted workers lower their wage demands to avoid unemployment and personal default. Thus, understanding the growth of the finance wage premium requires scrutinising the impact of business and household indebtedness. To evaluate this argument, we use quarterly data from Eurostat for Greece over the period 1999Q1–2021Q3, and we show that increases in all components of private debt are strongly associated with positive changes in the finance wage premium.