Solidarity: Paul Krugman addresses the question of whether there’s “slack” in the labor market — e.g. people still looking for work — or whether the Fed should worry more about wage inflation (if employers bid to hire scarce workers) and less about unemployment. Do you feel any wage inflation? Krugman doesn’t either. He seems to suspect the market still has slack, and if it doesn’t we should maybe let wages rise first before we decide to call off the party:
“If you’re puzzled that a falling unemployment rate hasn’t translated into faster wage growth, well, that just reinforces the point that we truly don’t know how much slack there is. And does anyone think that wage growth was wildly excessive before the financial crisis? If you don’t, then you should believe that we need an extended period of tight labor markets just to get back to where we were.” [E.A.]
Makes sense to me — both the analysis and the prescription. Tight labor markets worked in the 90s. Wages rose at the bottom. Why shouldn’t that happen again? That’s why the Senate’s Gang of 8 immigration bill is such a terrible idea! It would inevitably — intentionally — loosen the labor market by formally doubling (approximately) the number of legal immigrants and informally give up on controlling the borders against illegal immigrants (because its border control measures, even where they aren’t vaporware, will never actually be allowed to take effect). There’s even a special new visa program — the “W Visa” — to bring in hundreds of thousands of unskilled, low-wage workers, just in case you were worried that the poorest working Americans might see an increase in pay.
The Congressional Budget Offices sees the Senate’s “comprehensive reform” adding 6 million new immigrant entrants to the labor market in the next decade, but that seems conservative (for one thing, that’s only the legal entrants). Progressives concerned with the working poor, especially, should oppose this. Only elites oblivious as to what is actually going on in the country could automatically assume it’s a great idea. …