Krugman: Why Are Wages Still Rising? (Wonkish)

[ProSense]

Why Are Wages Still Rising? (Wonkish)

One reason comparisons between current events and the 1970s are so wrong — and fears that stagflation is just around the corner are so wrong (and have been wrong for three years running) — is the absence of any surge in wages:

<...>

But some people have asked me, with all this unemployment, why are wages still rising at all?

Well, one answer is that there is still some leapfrogging going on, with wages rising because they’re expected to rise, a process I wrote about when trying to explain why we need a concept like core inflation.

But I suspect that’s not the whole story, that downward nominal wage rigidity — the great reluctance of employers to demand, and workers to accept, actual wage cuts — is also at work.

<...>

[geckosfeet]

1. Wages are rising ever so slightly. This also reflects an employers attempt

to hang onto people that they have 'trained' and developed the skills they need to run their machines and processes. But 2% and 3% raises do not help the employee keep up with increased cost of travel, food, clothing etc. Employers reason that this is just enough to keep them on the plantation.

Employees are losing ground while businesses are gaining ground. Big time.

So as I see it, we’re in a state of censored wage deflation; underlying forces are trying t7 make wages fall, but thanks to the combination of dispersion and rigidity actual average wages are still rising slowly.

And yes, that means that we’re looking at an economy with desperately deficient demand.

Why Are Wages Still Rising? (Wonkish)

[high density]

2. There are certainly regional issues at work in this

I've watched a job at my workplace stay open for the past year. We've had only a few resumes and one interview candidate that fizzled out. I think everybody with the skills for the position has simply moved to a place where those skills are in more demand.