“There are signs that the prolonged recovery in North America is boosting the incomes of lower- and middle-skilled workers, with real wages for most workers rising since 2015.”

Growing income disparity is often seen as contributing to the rise in populism. Data since 2016 tend to show that the gap between lower- and upper-income groups is closing as labour markets tighten, but this does not necessarily mean the populist wave is about to peak.

Since half of the gains from financial assets go to the 10% richest households in the OECD1, the strong performance of markets since the financial crisis has contributed significantly to income inequality. More importantly, real wages for low- and middle-income earners have stagnated or even fallen since 2000, whereas the upper-income brackets have seen their earnings grow.

Low- and semi-skilled workers vote more for populists because they have lost out to globalisation and the technological advancements that have led to the rise of automation. However, there are signs that the prolonged economic recovery in North America is now offering a boost to lower- and middle-skilled workers as well. In the US, real wages for most workers have risen since 2015. The improvement is particularly visible for unskilled American workers, who have received sharp real pay increases since 2017.

Wage growth could continue in most western countries and should benefit low and semi-skilled workers. However, this does not mean the populist wave will recede imminently, as it will take time before lower earners catch up after years of wage stagnation.

1 OECD (2016), Society at Glance: OECD social indicators. doi: 10.1787/888933405431 (Accessed on 31 January 2019)