The Latest on Markets and the Political Moment in Israel
Bloomberg Surveillance
00:00
Wages Follow Prices, Not the Other Way Around
Despite tight labor markets and a wave of retirements, the share of income allocated to workers has decreased, highlighting a significant shift in economic dynamics. This trend, observed over the past 25 years, challenges traditional economic beliefs that tight labor markets lead to inflation through rising wages. Instead, it suggests that prices are influencing wages, not the other way around. Therefore, concerns about inflation in tight labor markets are unfounded if workers' income shares continue to decline.
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