May 7, 2018

BACKWARDS:

America's putrid wage growth (Jeff Spross, May 7, 2018, The Week)

Average hourly wages for production and nonsupervisory workers (i.e. most people in the workforce) grew just 2.6 percent in the 12 months culminating in April 2018. That's certainly better than the 1.2-percent pit this metric hit in late 2012. But wages were growing at 4 percent at the peak of the last business cycle, just before the economy cratered in 2008. Wage growth also hit 4 percent during the late-1990s boom, and at the end of the 1980s business cycle before that.

At this point, the unemployment rate may obscure more than it reveals. People are getting jobs. But are the jobs everyone's getting any good? Do they pay well?

Thus far the answer is largely no. And grappling with that fact requires an unpleasant review of economic policymaking over the last few decades.

Price growth got out of hand in the 1970s, peaking at around 10 percent. Economic officials broke the price spiral around 1980. After that, inflation came back down to Earth, and eventually leveled off around 2 percent in the 1990s. This story is now almost universally hailed as one of the great accomplishments of modern macroeconomic policymaking.

I'm sure you sense a "but" coming.

Simply put, if you curtail inflation, you often also curtail wage growth. 

If you curtail wage growth you curtail inflation.

Posted by at May 7, 2018 4:44 AM

  

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