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Friday, November 5, 2010

Wages and Inflation

Paul Krugman details the connection between wages and inflation:

I get a fair number of comments to the effect that worries about deflation are all wrong, look at commodity prices. I’ve tried in the past to explain why we should focus on sluggish, sticky prices, not volatile prices like commodities — hence core inflation. But let me add another point: arguably the stickiest, sluggishiest prices are those of labor. So why not focus on wages?

Source: BLS