Readers Comment: I believe if you want to solve the recession then look at footballers.
they earn millions and for what/kicking a ball around!! I think their wages should be cut down to say 75k a year and the remaining money should be used wisely.
This recession illustrates that economic policy often involves making decisions based on economic utility rather than a sense of justice.
For example, the government was right to bail out the banks, even though the incompetent bankers didn’t deserve to be bailed out. (Why we need to bail out banks)
By contrast, the honest car worker who lost his job, probably deserves to keep his job. But, unfortunately, the government can’t subsidise every potential job loss in an economy.
The high wages and economic rent of footballers is a good example of the laws of supply and demand in practice. See Wages of footballers
If the top footballers had their wages cut and the income was distributed to lower paid workers, it may create a small increase in consumption. Even though there is no extra money in the economy, it is likely that low paid workers will have a higher marginal propensity to consume than footballers on over £50,000 a week.
In other words, those earning over £50,000 are likely to save a higher % than workers selling burgers for £15,000 a year. However, the impact on overall aggregate demand would be limited at best.
In a recession, the inequities of income distribution seem more unfair, but, it is not inequality which directly causes a recession. Nor is solving inequality a solution to the recession. Can a recession be avoided?
This does not mean inequality of income is necessarily good, but, it is not directly related to the problems of a recession.
Interestingly, many professional footballers will be affected by the new 50% income tax band. – Some Premiership players have even threatened moving to countries with lower tax regimes.