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It is argued that the Phillips curve is not working. Is it?
Used to be low unemployment means higher wage increases.
Reasons could be:
1. globalization, workers can be outsourced to other low wage countries.
2. union strength is weak, used to be 20% workers unionized, now is a lot less, especially auto workers.
3. productivity gain is low (?) companies not invested in plants and equipment, rather keeping cash offshore or return to shareholders via dividends or buyback.
4. unemployment rate is not static. 25-54 participation rate in labor force was 80%, now 78%, some could be incentivized back to work and keeping the wage low.
5. some signing bonus or other perks were not quantified or measured.
6. the perfect storm could be coming in a big way. All at the same time.
7. workers treated the inflation being low, their low wage increase is still ok to them. |
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