The real cause of higher worker pay

From the November 19, 2012 Open Europe news summary:
During a radio interview with Europe 1, French Industry Minister Arnaud Montebourg said that Germany “should raise its salaries” to drive growth, and also asked Germany “to provide social security worthy of its name in a number of sectors”.
La Tribune

The idea that paying people more will increase demand and solve all our problems was refuted conclusively over 150 years ago by the classical economists, but that doesn’t keep today’s ignorant politicians from thinking that they have stumbled upon the idea for the first time. This is nothing more than believing that paying someone to buy your product will make you wealthy, a truly irrational idea. On the contrary, higher pay is a result of only one thing–higher productivity of labor. And higher productivity of labor is the result of only one thing–more capital per worker. And more capital is the result of only one thing–savings. We cannot spend ourselves into prosperity, but we can SAVE ourselves into prosperity, economic self-sufficiency, and economic security.  Patrick Barron

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