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Monday, December 09, 2019 {{ new Date().getDay() }}

Labor

A popular line on our recent surge of inflation is that an over-tight labor market has led to rapid wage growth, which in turn forces companies to raise prices. Higher prices in turn lead workers to demand higher wages, which will give us a wage-price spiral and soon lead to double-digit inflation.

While this was a story that plausibly fit the data in the 1970s, it is very hard to make the wage-price spiral fit the current situation for a simple reason: The wage share of income has fallen sharply since the pandemic. By wage share I mean total compensation to workers, including fringe benefits, not just cash wages and salaries.

Here’s the picture:

Worker Share of Net Income Decline chart Federal Bureau of Economic Analysis

As can be seen, the wage share of corporate income had been recovering gradually from the troughs it hit in 2014 following the Great Recession. However, we see a sharp reversal in 2021, with the wage share falling from 76.1 percent to 73.7 percent, a decline of 2.4 percentage points.

Perhaps some economists can tell a story where rapid wage growth is driving inflation even as the wage share of income is falling, but I’m not that good an economist. [Editor’s Note: “Good” as in dishonest.]

This still looks to me like a case where supply-side disruptions, associated with the economy reopening from the pandemic together with the war in Ukraine are driving inflation.

This view is consistent with the fact that year-over-year inflation in the European Union was 7.5 percent as of March. The EU countries did not have as big a stimulus as the United States and by most measures the EU labor market is not as tight as in the United States.

Published with permission from DC Reports. Dean Baker co-founded the Center for Economic and Policy Research in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer."

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President Biden Addresses NABTU

President Biden, largely considered the most pro-union U.S. president in decades, took aim at Amazon and former "defeated" President Trump in a speech to the North America's Building Trades Unions (NABTU) Legislative Conference. Biden commended the New York workers at an Amazon.com Inc (AMZN.O) warehouse in Staten Island for having voted to form a union by saying: “And by the way, by the way, Amazon here we come. Watch. Watch.” And yet the media will somehow spin it to make Joe Biden seem like he doesn't care about workers while Republicans do anything and everything to ensure they will raise their taxes if they take back power this November.

However, the most memorable moment in President Biden's speech to the pro-union org was when he mockingly called out trump for the $2 trillion tax cut that did very little for working Americans in the long run .

"The two trillion dollar tax cut the last guy...what was his name...anyway, the last guy; I forgot, he never showed up at the inauguration," quipped the president.


@scottdworkin President Biden just slammed Trump hard—amazing. 😎🥳😂 #biden #joebiden #potus #presidentbiden ♬ original sound - Scott Dworkin

Michael Hayne is a comedian, writer, voice artist, podcaster, and impressionist. Follow his work on Facebook and TikTok