A Wage Rigidity View (Finally)

Paul Krugman has a great take on the idea that the market can “auto-correct” the unemployment problem. Basically, he finally does what I’ve been very frustrated that Economists won’t do; not only acknowledge a wage rigidity (low wages), but put it into a model with a liquidity trap- (which is what we have now) to explain WHY wages are rigidly low.

I just listened to a couple of Economists talk about how the zero lower bound doesn’t really exist because people are generally better off than their parents. Except, here we are in a zero lower bound, people are NOT better off than their parents statistically, and I’m not sure what one has to do with the other. I guess the zero lower bound adds to the liquidity trap which constrains wages (a-la-Krugman), but if it’s all a fantasy, then what does it matter?

I guess all the Walmart workers can quit tomorrow for that $15 per hour job with full benefits that they’ve been missing out on.

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