By contrast, returns to capital and skilled labour increased. For Goodhart and Pradhan, the fall in real wages constituted the main driving force behind the low inflation environment since the beginning of the 1990s in developed countries. However, nowadays these factors are petering out.
In particular, China’s downward pressure on worldwide prices is weakening, since its working-age population is now shrinking while the share of retired persons is on the rise. At the same time, Goodhart and Pradhan argue that the increasing labour market participation of young populations like those in India or Africa will not be enough to offset the demographic trends in developed countries.