Paul Kedrosky, a millionaire investor and partner at SK Ventures, tweeted today about suspected confusion between wages and prices
He admonished those who consistently warn that wage increases will make inflation go up, calling them"nonsensical" and"not born out by historical wage-price relationships, where, while there is a relationship, it is messy and nonlinear."On the other hand, he noted, individuals who demand that wages must"catch up" to current inflation are also in the wrong due to the expectation that there will be economic consequences, referencing data from the U.S.
If people demand that wages remain sticky when prices fall, and rise if prices go high enough, then they will, at the margin, lay off more and/or hire less."Second misunderstanding is from one cause of recent low inflation: the entrance of some very large export economies into the global trade system, driving down prices in developed economies. This is now unwinding, introducing structural changes wrt price levels.