Grandstand. What if the famous wage inflation, which has made a resounding comeback in macroeconomic consensus, was just an endless smokescreen? The metaphor is more than seductive.
The history of recent decades tends to show that during inflationary sequences, a rise in wages is simultaneously expected, or rather summoned, by economists… without it actually materializing. While a fairly constant increase in social minimum wages is observed, this rarely applies to median or higher wages. Explanations.
Let us return first of all to the Keynesian academic foundation which qualified wage inflation and its correlations with the unemployment rate and inflation: the Phillips curve. Born from the work of the economist Alban William Phillips (1914-1975) at the end of the 1950s, this established, in short, the rule according to which the saturation of the job market, and therefore a low unemployment rate, leads to an increase in wages, which itself maintains the rise in consumer prices.
With a very pure logic, this theoretical mechanism has legitimately imposed itself as a standard within the macroeconomic and political spheres, helping to shape a good number of government programs to combat unemployment.
Until the oil shock of 1973
The Phillips curve seems to be fully operational in economic reality until the oil shock of 1973. Before this break, the American labor force benefits from a fairly constant increase in real wages, in line with a synchronous supply/demand balance on the market. labor synonymous with near full employment, but also with continued growth in labor productivity.
Then the equation is disrupted with the stagflation of the 1970s: an unprecedented situation marked by the slowdown in production and economic growth, productivity in decline, high unemployment while inflation remains galloping.
Since then, a form of disconnection has been observed: productivity gains and periods of sharp decline in unemployment no longer lead to the realization of a general increase in wages. This was particularly the case in the United States between 1980 and 1990, when wage growth slowed from +10% to +5% per year, for a job market that was nevertheless tight with an unemployment rate falling by 10 % to 5.5% and an employment rate up from 60% to 64% over the decade.
Why does wage inflation no longer occur, or not as much? This development owes a lot to the shift in innovation massively triggered by the economy, whether it be the robotization-automation of the 1980s or the boom in digital technologies over the past twenty years.
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