Are Rising Labor Costs A Problem For Economy?

Food For Thought

The chart below shows when there are negative real rates, productivity growth suffers.

This could be nothing or it could be something policy makers focus on in the next cycle. It’s worth noting that in both periods where productivity growth fell there was demographic stress. Baby boomers first joined the labor force in the 1970s and started leaving it in the 2000s.

Conclusion

College endowments are increasing even quicker than student loan debt. The concept of the tax payer being responsible for tuition when colleges are already catered to doesn’t make sense. Costs need to come down. The good news is the lower half is seeing almost double the wage growth of the upper half because low income workers always do the best at the end of the cycle. Policy makers need to be careful not to destroy the incentive structure of capitalism when they try to increase labor’s share of the economy. Immigration will help America outperform other developed economies with aging populations.

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