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One of the main mechanisms by which inflation stimulates the economy, is that it lowers wages (because of sticky wages) hence decreasing unemployment. So inten
by animefan 11y ago
One of the main mechanisms by which inflation stimulates the economy, is that it lowers wages (because of sticky wages) hence decreasing unemployment. So intentionally raising wages as a form of stimulus seems counterproductive. Could you explain your argument more?
- badsock 11y agoOne of the ideas floating around is that the economy is currently limited on the demand side, and that increased wages will result in more disposable income and higher consumption.
- animefan 11y agoIncreasing wages will make employers less inclined to hire people, and thus potentially less total disposable income. Giving ordinary people more money directly seems like a more reasonable sort of stimulus. Where are these ideas floating around? The idea of sticky wages dates back to Keynes.
- badsock 11y agoI tend to side with the argument that employers ultimately hire not because people are cheap, but because they need them to meet demand. If there's no demand, there's no wage low enough to justify a hire. I don't want to speak for Thomas Piketty, but my reading of his data is that generally economic growth is the product of higher wages, not the other way around.
- deleted 11y ago[deleted]