Real wages-the big picture
I’m writing a longer review, but at the same time, I want to share three quick charts that are very instructive for wage-driven inflation and what it might mean. I separate these from the inflation discussion because I suspect that economists are completely wrong about wage inflation.
Consider the actual salary chart above. It may be hard to imagine, but in the 35 years from 1979 to 2014, the median real wage was flat. This means that after adjusting for inflation, the workers have the same purchasing power as the year I graduated from high school. Three and a half centuries later, when the economy after the global financial crisis saw the unemployment rate really go to cyclical lows, they began to rise (2015); then it accelerated to rise in 2020-21.
To make matters worse, the minimum wage adjusted for inflation is 2015 is the same as 1949This is why I keep saying that the sharp rise in wages is actually a catching-up by a lagging giant:
This raises a fascinating question: Are economists regressing wages? Should they ask why low-end wages have been a factor of deflation in the past 7 years? Maybe we should wonder why the minimum wage lags behind productivity, profit, top management compensation and inflation? Therefore, we might think that these rising wages are not an impulse of inflation-but rather a kind of “Partial relief of decades of lag, deflation, and low-end wages. “
I hope you see the second chart below, from Constance Hunter of KPMGShe pointed out that it is the bottom quarter that drives wages. This is consistent with the annoying salary reset that I have been proposing.
I’ll talk about it tomorrow. ..