To help match demand and supply, wage developments should reflect local labour market conditions. Third, there is a need to increase knowledge and the transferability of skills. Bringing unemployed or inactive people into jobs will, over time, enhance individuals’ labour productivity and thus real wages.
The economic consequences when bubbles burst depends on the extent to which individuals and companies have taken on debts that they cannot comfortably meet. Asset price changes typically involve borrowing and lending in financial markets, because it is future income that is being used to “fund” current expenditure.