Capital formation is necessary for economic growth and rising wages. We must increase the savings rate if we wish to continue our current economic expansion. Without savings, it is impossible to build factories, purchase equipment, conduct research, or develop technology. Savings allow businesses to purchase equipment, and new equipment allows factories to be more productive, which in turn raises the income of workers and owners. This link between savings rates and capital formation is not rocket science.
Workers are more productive when they are working with modern equipment.
More productive workers earn higher real wages. Higher real wages are the beginning of higher standards of living. But, the key is capital. American industry must have access to a readily available supply of affordable domestic capital to purchase this productivity enhancing equipment. The bottom line is that capital formation is necessary for economic growth and rising wages.