Krugman vs. Reality (Again)
Krugman: "In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s"
Reality: In the year to January, average hourly earnings are up 3.9%, more than the 10-year average of 3.3%. And no sign of recent deceleration can be detected as the 3 month increase is 1% (4% at an annual rate).
Reality: In the year to January, average hourly earnings are up 3.9%, more than the 10-year average of 3.3%. And no sign of recent deceleration can be detected as the 3 month increase is 1% (4% at an annual rate).
posted by stefankarlsson at 4:04 PM
8 Comments:
That can only mean one thing: more unemployment. But hey, Barack Obama's got this all figured out by nationalizing industries and creating jobs to weatherize homes...NOT!
Paul Krugman is a joke. Could we possibly demand that Nobel Prize back? Either that or we force him to eat 100 copies of the General Theory ....
hmm - you fail to see the issue - remember that the oilprice has dropped and consumer price index with it. This explains major part, hence Krugman can be completely right
No, Krugman can't be right, because I in this post discussed nominal wages, something which could hardly have been inflated by lower oil prices. And the fact that real wages have increased even more just makes his error even worse.
"No, Krugman can't be right, because I in this post discussed nominal wages, something which could hardly have been inflated by lower oil prices. And the fact that real wages have increased even more just makes his error even worse."
Are the effects on real wage due to the deflationary low "velocity" environment or it could be related to lower commodity prices. Of course, the two aren't mutually exclusive as the latter is mainly a symptom of the former in this environment.
Popper: price deflation has been almost exclusively commodity related. Service prices have for example continued to rise.
krugman can totally be right and here's why: average wages only count those who are employed!
let's say our economy has 2 people. joe makes $5/hr, and steve makes $10/hr. average wage: $7.50.
suddenly: credit crisis. joe is fired, he's expendable. steve's wage is cut to $8. agerage wage: $8.
so notice what happened here: both joe and bob are now making less than they did before the credit crisis hit, but the "average" wage went up. because it doesn't count all the 0s.
this hypothetical is not that far fetched in real life. the first employees to be cut are usually the least skilled ones, making the smallest salary, because they are easier to re-hire later.
No, he still can't be right, because while the factor you mentioned, a factor which I've already discussed several times before (I assume you're new, so I'll forgive you for being unaware of that) probably does explain a minor part of it, the wage gains are so large that even if those laid of had on average zero wage (completely implausible in itself), that still couldn't explain the entire increase in average wages that I pointed to.
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