Paul Krugman: Monopsony, Rigidity, and the Wage Puzzle: "(1) The wage puzzle:F rom the mid-1990s until the 2008 financial crisis, it looked as if there was a fairly stable Phillips curve...
...a relationship between unemployment and the rate of wage growth. This wasn’t the “accelerationist” Phillips curve that underlies the concept of the natural rate of unemployment–there was no sign that low unemployment led to accelerating inflation. It was, instead, a neo-paleo-Keynesian relationship between unemployment and wages. After the crisis, wage growth dropped – but only about as much as it dropped in the early 2000s slump, despite much higher unemployment. And it has increased only modestly since then, to levels well below pre-crisis growth, despite unemployment rates as low as we’ve seen in a very long time...
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