The Effects of Debt on Debtors and the Economy: An Observational Test on Consumer Credit and Wages

In this study, the various effects of borrowing are discussed. In this context, the person or company who underneath of debt burden will loses its bargaining power and reduces its share of production income. In order to measure this situation, the relationship between consumer credit and wages has been observed. This observational test, covering the first quarter of 1973 and the first quarter of 2017 on the US scale, revealed the existence of an adverse relationship between consumer loans and wages. From this result, the decision to participate in the workforce has been interpreted. The decision to participate in the workforce, which was interpreted through the data obtained from previous surveys, is explained in this study by using macroeconomic variables. This, in turn, contributes to the reliability of the test performed. Within the scope of the study, the effects of the bank credit on the income distribution, production and productivity were discussed. The results are interpreted and policy recommendations are presented. Furthermore, it is understood that the observational test resultant wages are causes of bank credits. Accordingly, the decline in wages pushes individuals to borrow.