One of those interesting stories with a twist from Business Report here. It starts with
Declining wages in many countries in the first half of this year following a sharp drop last year has sparked concern of insufficient demand in the global economy to underpin a recovery.

"The continued deterioration of real wages worldwide raises serious questions about the true extent of an economic recovery, especially if government rescue packages are phased out too early," Manuela Tomei, the director of the International Labour Organisation's (ILO's) Conditions of Work and Employment Programme and lead author of Global Wage Report, said yesterday. "Wage deflation deprives national economies of much needed demand and seriously affects confidence."
Less money being earned in wages and salaries means less consumer spending which means smaller economy - no problems so far. Of course with above inflation wage increases in South Africa we must be doing well
the Reserve Bank's 2008/09 annual report says nominal wage growth in the first half of the year based on the average wage settlements in collective bargaining was 9.7 percent. This is based on the Wage Settlement Survey compiled by Andrew Levy Employment Publications and corroborates Statistics SA data.

For the first nine months of this year nominal wages increases averaged 9.4 percent, while consumer inflation in September was 6.1 percent.

Solidarity spokesman Jaco Kleynhans said above-inflation wage increases were not a bad thing as they led to greater consumer spending.
Yep - we must be well on our way to an economic recover...

Or maybe not.
Chief economist at Mike Schussler said demand was fading due to increased unemployment.

"People who have kept their jobs are doing well," he said. "People who have not are doing poorly."

With almost 1 million jobs lost since January, high wage increases meant that it would take longer to create new jobs, he added.
Yep, those lost jobs come off the total payroll and with margins squeezed from both the sales price and labour cost ends, they're not going to come back in a hurry either.

Does that mean under current circumstances high pay increases are actually a threat to economic growth?