In this Letter I summarize what research can tell us about whether or not wage data are, in fact, informative for future price inflation. Overall, the literature suggests that wages do not provide significant additional information beyond what can already be gleaned from other sources, including prices themselves.
These results do not imply that wages and prices are unrelated. Certainly they are tied together in the long run, and wage data will surely contain some information for future price inflation. However, after incorporating information from prices and activity measures, the marginal additional benefit of using wage data appears small.
What are the implications of this evidence? Figure 2 shows various common ways to measure wage pressure. Some of these measures have weakened in recent months, after hints of strength earlier in the year. Many market participants have watched these series closely, attempting to divine their implications for inflation. Many interpreted the earlier firmness as suggesting an imminent uptick in inflation and, likewise, the recent weakness as suggesting subdued price inflation in the future. However, this discussion suggests that one should not necessarily draw such conclusions. For example, rising wage measures might simply increase labor’s share of the fruits of production and squeeze profits without much effect on price inflation.FRBSF Economic Letter
Are Wages Useful in Forecasting Price Inflation?
Rhys Bidder
ht Mark Thoma at Economist's View
6 comments:
"this discussion suggests that one should not necessarily draw such conclusions. For example, rising wage measures might simply increase labor’s share of the fruits of production and squeeze profits without much effect on price inflation."
Especially with the profit share so wildly inflated to start with...
OT but pertitent to MMT assumptions about the JG:
STUDY: "It appears that an unemployed worker is better off remaining unemployed and searching for work rather than being employed in a low-level job while searching,"
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"Workers who are currently employed in a job relevant to the one they're applying for and for which they are qualified are generally more desirable to hiring managers than applicants who are either unemployed or working in an unrelated or low-level position."
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"This study focused exclusively on older applicants with more experience."
This is what I have been saying all along.
I don't think that the JG would necessarily do away with unemployment benefits that facilitate transition, or transfer payments to those unable to work.
However, there is the question of how long to provide unemployment benefits and what to do if they run out and the person is not employed at his or her level of competence.
I don't think that the JG would necessarily do away with unemployment benefits that facilitate transition, or transfer payments to those unable to work.
The majority of the unemployed do not receive unemployment benefits in the first place. There are numerous restrictions on who qualifies for benefits. Ditto SNAP.
Yes, there is the question of how to help the long term unemployed. Of course functional finance budgeting would alleviate much of that, but it's ain't gonna happen in our political environment.
My view is that there should be transitional transfer payments for a "reasonable" time, after which a comparable position should be made available at comparable compensation before skills deteriorate. Taking early retirement on a pension can also be offered as an option.
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