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https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

"Even in the long run, it's really really hard to cut nominal wages..."

Don't get it wrong. Inflation is a tool to cut wages. It is fundamentally anti-labor.



And yet [ceteris paribus] a wage rise for a proportion of workers literally is inflation.

It is difficult to paint the alternative of artificially restricting the money supply to a level where the private sector [as a whole] must reduce some employees' nominal wages or fire them every time it offers pay rises to its most in-demand staff as more pro-labour. It doesn't sound any more pro-labour when people preferring that arrangement argue that recessions are a more appropriate mechanism to hold down wages, and acknowledge the purpose of zero inflation [and acceptance of economic downturns] is to allow wealth to be preserved for years or even generations without the need for it to be used in job creation.


Yes, it makes real wage cuts instead of catastrophic job cuts more practical when particular forms of work lose market value, which also reduces the degree to which future risk of decline needs to be built in up-front to wages.

But it's a blunt instrument. Providing tools to aid those workers adversely affected by those market shifts, whether by declining real wages or lost jobs, is the role of fiscal, not monetary policy.


It's really presumptuous to say that it's better to cheat the labor class out of its earnings than have them deal with job losses (which you don't even know would happen).




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