It’s Wages, Stupid - by Jeff Madrick at New Deal 2.0

[applegrove]

http://www.newdeal20.org/2011/11/17/its-wages-stupid-64891/

It’s Wages, Stupid

Thursday, 11/17/2011 - 11:16 am
by Jeff Madrick
at New Deal 2.0 |

"SNIP.......

By focusing on supply, economists and policymakers have lost sight of the fact that driving down wages destroys demand.

For a few decades now, American economic policy has focused on keeping inflation low, assuming that the natural rate of unemployment is fairly high. In general, that has led to stagnating wages. Family income today is at 1990s levels. Adjusted for inflation, hourly wages are at levels they last reached in the 1960s. The wage share has been falling.

Some economists claim inequality is the bigger issue due to runaway income at the top. My own view is that a better way to understand America’s dilemma to focus on stagnation for the broad middle and bottom. As I note in my latest piece for the New York Review of Books, the incomes at the top, which account for most of the inequality, are made in finance — much of which is a game Wall Street plays with itself. For this brief piece, I will put that issue aside.

It is time to talk about the importance of high wages to sustainable growth in America and Europe — indeed, in most countries around the world. The precarious circumstances in the eurozone today are widely understood, as was the U.S. financial crisis, as a problem of fiscal and financial discipline. In fact, I’d argue they were mostly a product of economic models based on low wages that were not sustainable.


............SNIP"

http://www.newdeal20.org/2011/11/17/its-wages-stupid-64891/

[Beartracks]

1. Much of Madrick's argument reminds me of my sig line.

K&R

:patriot:

===============

[applegrove]

2. Right on! I've been saying for years that the rich have been using unemployment and lower wages to

fight inflation.

[rainy]

3. Consumerism isn't the answer either. Capitalism can't float all boats and

the earth can't sustain a growing world of American style consumers.

[applegrove]

4. Oh and we will not be able to afford cheap goods all the way from China when the price

of oil doubles.

[Citizen Worker]

5. Higher wages, health benefits, pensions, paid holidays, paid vacations, improved working conditions,

on the job safety and a host of other improvements are made possible through Union membership.

[applegrove]

6. Yup.