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asked ago by (630 points)
Adam Ozimek at Moodys has argued for a couple of years that there is no mystery about a disappearing Phillips curve or missing wage growth if you look at prime-age non-employment, rather than unemployment. The recent data still looks consistent with his hypothesis.

2017: https://www.economy.com/dismal/analysis/datapoints/296127/There-Is-No-US-Wage-Growth-Mystery/
2019: https://ma.moodys.com/rs/961-KCJ-308/images/2019-01-14-Macro-Outlook.pdf

To what extent do people accept this argument? If not, what are the main counterarguments?

1 Answer

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answered ago by (2.7k points)
edited ago by
I think that the economy keeps only a few years in its boom. That makes people think that workers are always in a less advantageous bargaining position. We all have to study how difficult is for an employer hire a worker that matches with his expectations when unemployment is low. I'm sure that wages must tend to rise when it happens. Therefore I think that the Phillips curve is not lying about the mecanism of labor market. Although it's a bit under the mean and there is room to improve. Bargaining power I think is lower nowadays regarding low income jobs.

In addition I think that the non-employment Phillips curve is a little bit ambiguous because you can't know exactly what are the reasons that make people not to join the workforce. There can be an excess of wealth accued or simply they are graduating to join the workforce earning a higher wage. Therefore I think that non-employment measure can have a few errors and unemoloyment rate could be more accurate.