Wages and Panic Buttons

Tom Lehman TLEHMAN at lor.net
Thu Aug 5 14:03:08 PDT 1999

Ellen, speaking of pricing power or price gouging. This afternoon I stopped at NAPA a large auto parts chain for a few things. One of the things I wanted to buy was a can of acetone solvent. I asked the price of a can of acetone, the guy told me $ 7.49. I laughed at him and left. I went down the road to another parts joint and bought the same size can of acetone for $2.79! I could probably even buy it cheaper. Greed is a big cause of inflation!

Tom Lehman

Ellen Frank wrote:

> >
> Doug writes:
> >
> >Between 1997 and 1998, union members had an average weekly wage
> >increase of 3.0%, vs. 4.4% for nonunion workers. I suspect that's a
> >reflection of a higher unionization rate in manufacturing, where the
> >real wage is virtually flat; for the last two years or so, private
> >service workers have seen real hourly wage increases in the 2-3%
> >range, despite low union density. Obviously this service
> >outperformance is a function of tight labor markets without
> >significant import competition.
> What I meant is that the weakness of unions in general (along with
> other institutions like contractual raises) has made it difficult to
> bargain for real wage increases without productivity increases.
> The old radical inflation story goes that inflation is caused by
> conflict over income distribution that can't be resolved politically and
> is displaced into the economic arena. When unions are strong
> and/or labor markets are tight, workers try to resist
> real declines in income (rising oil prices for example) by
> using institutional power to increase nominal wages. But of
> course employers do the same thing, as does every other
> organized group with some pricing power. Often wages
> fall in real terms. The impact is often uneven, depending
> on the strength of wage-setting instituions. Tight labor markets are
> an important part of this story in the US. In some South American
> countries though inflation gets going at very high rates of unemployment
> simply because of powerful institutions with pricing power.
> >
> >
> >In the U.S., debt substitutes for the social wage. Free tuition! Free
> >healthcare!
> You're right. Limit the cash economy and we limit the power of wealth.
> >
> >
> >
> >I think it'd be more productive to talk about the tightness or slack
> >in labor markets than about inflation. That's what Wall Street means
> >by inflation - the balance of class power. That's what Greenspan
> >means when he's talking about the dwindling supply of new workers.
> >
> But the question remains. What if BLS announced a 0.5% CPI increase for
> July? What's the liberal-progressive line? In arguing against NAIRU,
> a number of people have essentially said - the Fed shouldn't tighten
> because rising wages doesn't lead to inflation. But what if it did? Does
> that
> mean the Fed SHOULD tighten? I'm not accusing you of painting
> yourself into this rhetorical corner, Doug, but some prominent
> commentators have.
> Ellen
> >

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