I wrote: >in which the global downward harmonization of wages and social >benefits is dragging down consumption
Doug asks: Where are wages falling? And where is consumption falling (even after subtracting debt growth)? real wages are falling at this point in the US, but that's a short-term phenomenon (so far). If Dean Baker is right about the underestimation of CPI inflation, then the fall has been larger and more sustained. But I guess I didn't make it clear that "harmonization" and the "race -- or rather, creep -- to the bottom" refer to wages _relative to labor productivity_. It's unit labor costs that matter to business, not wages. Also, wage costs (including benefits) can rise while the value of the wages to the workers fall, as when medical insurance rates go up at the same time that the quality of medical care delivered (hard to measure, natch) falls. I wouldn't simply subtract debt growth from consumption. I'd also subtract the deviation of normal saving from actual saving. Actual saving has been very low compared to the post-WW2 norm, so this gap has been high. This gap, I think, represents consumer borrowing _at the expense of personal retirement savings_. Of course, people are allowed to do this as long as the housing bubble continues. jd
