Paul Krugman: Monopsony, Rigidity, and the Wage Puzzle: "...

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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