What would Scott Sumner Say?
By Arnold Kling
Patricia Minczeski writes on the WSJ blog,
U.S. wages as measured in the Labor Department’s employment report have been largely stagnant over the past few months, despite improvements in the job market. In fact, many industries saw more wage growth during the recession than during the recovery.
I imagine that Scott Sumner would suggest looking at causality the other way. That is, wages rose too much during the recession, causing unemployment. The slowdown in wage growth, combined with easier monetary policy and higher prices, is what has produced the recovery.
In fact, if writers had basic literacy in economics, they would understand that one should not be rooting for wage growth when there is high unemployment. When there is excess supply of labor, raising its cost does not help.