Wages and Panic Buttons

Max Sawicky sawicky at epinet.org
Thu Aug 5 07:27:15 PDT 1999

>Also, some of the worst real wage declines in the U.S. were during
>the high inflation years of the late 1970s. Some of the best recent
>real wage gains have come during the last two years, a period of low
>(and falling) inflation.

So, too in Britain. Inflation just drove down the real wage. ------------------------------------------------------

One must distinguish between inflation resulting from singular events like the oil price spikes, and that observed in 'normal' economic periods. The 70's experience does not invalidate the proposition that as a routine matter, higher inflation is associated with higher wage and GDP growth. The recent two-year period in the U.S. is a welcome break, brief so far, in a much more long-standing patter of wage stagnation.

Just comparing periods has its uses, but in statistical terms it is equivalent to a model with one explanatory variable (i.e., one is comparing GDP or wages to inflation and ignoring other factors).


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