The functional income distribution and labour market institutions the missing links in the agenda for inclusive growth after austerity

In the period after the Great Recession and austerity politics, we have witnessed a growing interest among international economic institutions and in mainstream economics into the relationship between inequality and sustained economic growth. The term ‘inclusive growth’ has become widely used as a lever for economic change during and after the recovery from the Great Recession. However, there is still some unclarity on the contents, desired macroeconomic outcomes and policy recommendations that should establish the backbone of this approach. This paper contributes to the debate by providing an overview of viewpoints and expanding on a strategy for inclusive growth, building on research in the field of industrial relations and labour markets institutions. We argue that two elements are missing in the current programme: the functional distribution of income and the role of institutions.