[Vision2020] wages and inflation

[Andreas Schou]

On 1/13/06, Donovan Arnold <donovanjarnold2005 at yahoo.com> wrote:
>
>  "But indexing the rise in minimum wage to yearly estimated productivity
> gains would not in fact cause inflation."-Andreas Schou
>
> Really? Humm, I find that surprising. Especially considering that the
> retail market had a 48% gain in productivity in 2004 over the yearly average
> since 1987. I would think an increase of nearly 50% in wages in retail would
> cause inflation through the roof. Especially since those gains were not the
> result of the unskilled labor force, but because of technological and
> business model innovations in the retail market created by Wal-Mart.
>

Donovan --

Productivity, as it's commonly expressed in the United States, is the amount
of value produced through non-farm labor per man-hour.  When real wages lag
behind productivity growth (as they have in retail for a long while, or has
they have in virtually every sector since 2000), this means that one of
several things are happening: profits are soaring, large amounts of capital
investment is occurring, or that management is soaking its labor pool for as
much as it can get.

Wage growth is not necessarily tied to inflation because productivity
increases actually increase the total value produced by the economy.

-- ACS

P.S. I am not an economist. Since Stephen's commented on this thread, I
assume he can slap me around a little if I've gotten this totally
ass-backward.
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