I’m really pleased to see that an academic economist has stated formally what I’ve said informally: that the economic crisis is a result of wage stagnation. It makes sense to me, and perhaps to you; the economic crisis was caused by debt, debt that American consumers acquired because they weren’t making enough money, that they weren’t making because wages had stagnated.
But here the question remains stubbornly complicated: how to encourage wage growth, after all? The Aughts featured fairly robust GDP growth and fairly robust productivity growth, but, again, no wage growth. Compensation went up modestly—health care costs ate up your raises—but it was insufficient and below trend, even when considering health care costs.
At least a partial solution, then, would be that whole bending-the-curve thing you hear so much about—all sorts of virtuous circles will be unleashed if we figure out health care reform—but it’s not everything or even sufficient. So what remains is the question, how to encourage wage growth, because it’s so clearly necessary at all non-plutocratic classes of society.