Friday, June 04, 2021

What If... Wages Actually Rose?

Me, 7 years ago.
[E]lites will do everything in their power to put the brakes on wage increases whenever any evidence (real or not) of such increases appears.
Don't think you had to be a supergenius like me to notice that for all of the focus on JERBS and THE ECONOMY by politicians, nothing makes them panic more than the idea that someone other than them might get a raise.

If we ever get to a sustained period of full employment, as we did in the good old days that conservatives pretend to love when [checks notes] taxes were really high, the squealing will never stop.

And yet, if the pursuit of maximum employment is an uncontroversial aim in the context of American oratory, it is a radical one in the context of U.S. policy. For the bulk of the past four decades, our government hasn’t merely declined to achieve full employment through public hiring; it has actively sought to keep millions of Americans perpetually unemployed.

This bipartisan consensus against full employment was rarely articulated to the public in forthright terms. During the crisis that consolidated the paradigm, policy-makers were sometimes blunt; in 1979, Fed chair Paul Volcker told Congress that in order for inflation to be brought down to a tolerable level, “the standard of living of the average American has to decline.” But as inflation became more of a historical memory than a present danger, the government’s prioritization of price stability over employment became increasingly camouflaged behind the dry technocratic verbiage of central-bank press conferences. Once decoded, the gist of this new consensus was simple enough: If unemployment falls beneath its “natural” threshold, then employers will be forced into a bidding war for scarce workers, who will then secure wages in excess of their productivity, which will force businesses to raise prices, which will lead workers to demand yet-higher wages, which will force businesses to raise prices further still, thereby setting off an inflationary spiral that will be difficult to stop. Thus, to save the economy from such destabilization, the government has to reduce economic demand — by raising interest rates, or cutting federal spending, or both — before unemployment gets too low, even if inflation is not yet apparent.