Avinash_Tyagi said:
Kasz216 said:
| Avinash_Tyagi said:First off Wage inflation would not be a concern in a depression, a depression is a period of a debt-deflationary cycle, wage inflation would actually be a net positive, because at most it would result in an inflationary push, and in fact evidence has shown little effect on price inflation due to wage inflation, in fact by inflating wages and having little or no increase in prices, you are increasing disposable income, a very very good thing in a downturn, when aggregate demand is depressed.
Now the issue with Antitrust legislation isn't that big of a concern, because the issue with trusts cartels and monopolies, is they effect supply side of the equation, but a Depression isn't a supply side issue, its a demand issue, demand is down across the board in a depression, partly due to fear, partly due to the fact that people just don't have the disposable income, and partly because people see prices falling, so they put off consuming until prices go lower. So while letting industries tkae advantage of such a thing in a period of normal economic activity may be very detrimental, a depression is demand driven not supply driven.
|
By inflating wages you lower how many people buisness can hire leading to unemployement.
Or at least i assume that's his arguement with wage inflation.
|
interestingly, during the period between 1933 and 35, unemployment dropped
|
Wage inflation would certainly be a concern, and it would not be a net positive. Kasz is correct in saying that inflating wages leads to higher unemployment. It is simple supply and demand. Also, it is as equally if not more important to prosecute anti-competetive behavior during an economic downturn as it is during a period of normal economic activity. If demand is the problem, how does artificially increasing prices not affect demand? To make matters worse, the artificial wage increases were coupled with anti-competitive behavior. Yes, unemployment rates may have decreased, but that should not be unexpected for two reasons: the increase in government spending to fund recovery programs such as the CCC would decrease unemployment; Americans worked markedly less hours than they did before the Depression. Had the US not allowed anti-competitive behavior and artificially inflated wages, the recovery would have been decidedly quicker.
This paper by UCLA economists Harold L. Cole and Lee E. Ohanian will better explain what I am communicating. I read this paper in one of my economics classes approximately 18-24 months ago.
