Well, yes, I can explain it, though I’m not endorsing the truth of this claim. It’s well known that nominal wages are “downwardly sticky” (economist Truman Bewley wrote a useful book on this phenomenon, fyi, based on his survey of employers asking to what extent and why they were reluctant to cut wages in recessions), which means that when effective labor demand falls in a recession, nominal wages don’t immediately adjust to equilibrate the labor market. Thus, any downward adjustment in *real* wages is accomplished primarily through increases in the overall price level. But if the price level doesn’t go up by much, as it hasn’t, then real wages don’t fall by much. As for why some industries might have more “pent-up wage cuts” than others, Bewley’s survey found that “primary sector” (read: good jobs) employers were more reluctant to cut nominal wages than “secondary sector” (low-wage, low-or-non-benefit, high turnover jobs) employers, e.g. because of negative effects on employee morale.
Gil From: [email protected] [mailto:[email protected]] On Behalf Of Robert Naiman Sent: Monday, January 5, 2015 5:13 PM To: Progressive Economics Subject: Re: [Pen-l] Oh, this is why wage growth is slow what? can anyone explain this, from their point of view? what is the logic, from their point of view? Robert Naiman Policy Director Just Foreign Policy www.justforeignpolicy.org<http://www.justforeignpolicy.org> [email protected]<mailto:[email protected]> (202) 448-2898 x1 On Mon, Jan 5, 2015 at 2:10 PM, Eugene Coyle <[email protected]<mailto:[email protected]>> wrote: The Federal Reserve in San Francisco has looked into the question of why wage growth is so slow. I have not read the full letter but I think sharing the beginning with you is very important. here it is: FRBSF Economic Letter 2015-01 January 5, 2015 Why Is Wage Growth So Slow? Mary C. Daly and Bart Hobijn Despite considerable improvement in the labor market, growth in wages continues to be disappointing. One reason is that many firms were unable to reduce wages during the recession, and they must now work off a stockpile of pent-up wage cuts. This pattern is evident nationwide and explains the variation in wage growth across industries. Industries that were least able to cut wages during the downturn and therefore accrued the most pent-up cuts have experienced relatively slower wage growth during the recovery. Read full article IT IS THOSE PENT-UP WAGE CUTS !!!!!! _______________________________________________ pen-l mailing list [email protected]<mailto:[email protected]> https://lists.csuchico.edu/mailman/listinfo/pen-l
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