The peculiar implications of inflation targeting in an economy filled with slack

After Bernanke’s Jackson Hole speech a few weeks back I began a long rambling analysis with what I saw as the key revelation:

Pretty disappointing, but with one silver lining.  We pretty much know where the “Bernanke put” is, he drew a line at roughly 1% core inflation.  That means no more “depression economics.”  Let’s get costs down and we can get a faster economic recovery:

1.  Payroll tax cuts (at the margin, employer only.)

2.  Replace unemployment extended benefits with large lump sum payments to the unemployed.

3.  Temporary (two year) minimum wage cuts to $6.50.

Of course this won’t happen, but it would promote faster growth if it did.  They are things Obama could try.

I recall that my claim there was a “Bernanke put” at 1% inflation, and an implied promise to use QE to make it happen, raised a few eyebrows at other blogs.  How things change in a month!  After the most recent Fed statement this view has become something close to the conventional wisdom everywhere from the sophisticated FT:

The Federal Reserve broke a taboo yesterday when it said quite baldly that inflation in the US is now below the level “consistent with its mandate”. In other words, it is too low. This is a very big statement for any central banker to make, since the greatest feather in their collective cap is that they successfully combated inflation after the 1970s debacle.

To the brash Wall Street Nostradamuses:

  • What does he see now? The Fed just announced “we want economic growth, and we don’t care if there’s inflation… have they ever said that before?”
  • What’s going to do well? EVERYTHING: stocks, bonds, gold etc. Stocks can’t go down that much, because the Fed is issuing a put. “You’ve gotta love a put.” (See more on the “Fed put” here.)

So the punditry seems to have arrived where I believe we’ve been all along—in a classical world where improved AS moves GDP in the “right” direction.  But when I wrote those lines I did not fully anticipate the implications of this Fed policy.  The term “classical world” is a bit misleading, as it implies a near-vertical AS curve.  In fact, the SRAS is now relatively flat.  And a flat SRAS combined with an inflation-targeting Fed leads to some peculiar policy implications that I haven’t seen anyone else discussing.

Imagine the standard AS/AD model.  When AS shifts downward by one percent, you get a small (short run) increase in output and a small decrease in prices.  In Krugman’s depression model, as formalized by people like Eggertsson, a decrease in costs can actually reduce output, by increasing expectations of deflation.

A model with an inflation targeting Fed and significant economic slack could not be more different from the Krugman/Eggertsson worldview.  Now even a slight decrease in business costs can produce a dramatic rise in output.  Call it a “large supply-side multiplier.”

To see why this occurs, think about what it means to target inflation.  For example, consider a central bank with a 1% lower bound on inflation in a country where the inflation rate is already at the lower bound.  If there is a threat of inflation falling further, the central bank will do enough QE to keep inflation expectations no lower than 1%.  Now assume there in an increase in aggregate supply, shifting the SRAS line to the right.  Normally, that would reduce inflation below 1%.  But with inflation targeting the central bank won’t let that happen.  They’ll do whatever it takes to shift the AD to the right by exactly the amount that AS has shifted right.  Inflation will be unchanged, and the positive supply shock will increase output.

Here’s where it gets interesting.  Think of the supply shock not as moving the AS to the right, but rather as shifting it downward (of course both changes occur.)  Why does it shift downward?  Because the cost of production declines.  Let’s assume Obama does some things to reduce business costs.  Say he cuts the minimum wage by 10%, and also cuts the employer share of the payroll tax by 2%.  Assume these changes reduce business costs by 1%, shifting the SRAS 1% lower in the up and down direction (remember, this is still an increase in AS.)

What happens to output?  Here’s the big surprise; the more correct Paul Krugman is about the SRAS currently being pretty flat, the larger the increase in output.  I think he is much more correct about the “slack” problem than his conservative critics, although I also believe the structural problems are a bit larger than he seems to imply.  Let’s take two cases, in one the slope of the SRAS is 1/3 and the other it’s 1/5.  If the slope is 1/3, and the SRAS curve shifts 1% lower, then the Fed must do enough QE to move AD 3% to the right, in order to prevent a fall in inflation.  If the slope is 1/5, the Fed needs to boost AD by 5%.  I think you see where this is going.  If the Fed is serious about preventing inflation from falling below 1%, and I think it is, we are suddenly in Andrew Mellon country.  You get recovery by driving down business costs.  Wages, real estate, auto parts from China, whatever.  Don’t prop up wages, don’t prop up the property sector, don’t try to force China to raise its prices.  And the biggest irony is that the more Krugman is right about the flat SRAS, the deeper into Mellon country we go.

Now of course I’m being a bit provocative here in my usual irresponsible way.  Mellon also favored tight money, which I don’t.  But I am doing it to make a point.  Krugman’s arguing for exactly the opposite approach; get tough with China, help out people with mortgages, do demand side fiscal stimulus, not cuts in the employer share of the payroll tax.  Indeed consider for a moment the implication of cutting the employee side of the payroll tax, which sounds better to those who live in a Keynesian demand-side world.  With sticky wages it won’t have any immediate supply-side effect, but it will increase AD.  Unfortunately, this will simply cause the Fed to delay its anticipated QE.  Why?  Because as people like me and Tyler Cowen and even Ben Bernanke have frequently observed, the Fed is the last mover in the stimulus game:

Well, in our short-term monetary policymaking, we are able to adjust for the conditions of fiscal policy, however they may be. I think fiscal issues are more important in the long-term sense because of the long-term obligations we have, for example, for entitlements. We have not found the fiscal situation to be a major impediment to our short-term management of monetary policy.

That’s right, he’s sort of saying; “You Congressman can play whatever fiscal games you’d like, but leave the determination of NGDP growth to the grown-ups at the Fed.”

Let’s suppose I oversimplified when I said they had a 1% target, a closer reading of the Fed’s minutes might imply something a bit more sophisticated.  Arguably there is an intention to gradually raise the inflation rate to 2% over the next two or three years.  Does that change my analysis at all?  No, any inflation target will do, it doesn’t have to be a fixed target.

There is a faint glimmer of hope for the Keynesians if you assume the Fed has a 1% lower bound on inflation, has no intention to push it back up to 2%, but will gladly allow fiscal stimulus to push it back up to 2%.  That would be a weird policy, and go against their statement that they eventually wanted to get inflation back to 2%, but it’s possible.  But even then, in that best case, it would merely be an argument for fiscal stimulus, not an argument against austerity.  And let’s face it; fiscal stimulus isn’t going to happen.  I don’t think austerity will either, but there are at least some supply-side policies that the Republicans would support.  It’s up to President Obama.

This result is so counter-intuitive that a visual metaphor might help.  Imagine you’re playing a game with your child, where you stand in one room by the door, and she stands on the other side of the door.  If she pushes one way, you push back so that the door doesn’t move.  If you want the other person to push on the door, you must convince them that they shouldn’t let the door open into their room.  That’s what we’ve been trying to get the Fed to do, push back against sub-1% inflation.  Now they’ve finally committed.  So we are free to push prices as low as we want with supply-side policies, knowing they will push back with demand-side policies to prevent prices from falling.  If the door remains immobile, how have we helped the economy?  The door symbolizes inflation, and it stays at 1%.  But in terms of output, both actions tend to push it higher.  More AS from government policy reforms, and a push-back of more AD from the Fed.

A few other random observations:

1.  Has this been tried?  Yes, in late 1921 the Fed stopped a severe deflation and stabilized the price level.  There was then some severe wage cutting and the economy took off like a rocket.  And this occurred in a situation where there was very little demand-side fiscal stimulus.  Today’s labor markets are nowhere near as flexible, so it would be better to have a bit more monetary stimulus.  As we recover, the 99 week UI extension can gradually be scaled back, and this will promote a virtuous circle of more AS and more AD.

2.  When the Congress passed a law in 2006 raising minimum wages in three steps, they probably anticipated that NGDP would continue growing at a little over 5% per year.  If it had, by now it would be about 10% above current levels.  In other words, the minimum wage in 2010 is probably roughly 10% above where Congress would have set in 2006, if they had had perfect foresight about the economy.  I know there won’t be any minimum wage cut, but it would almost certainly reduce youth unemployment if it occurred.

3.   In the end I still favor a more expansionary monetary policy.  The “Bernanke put” will probably keep us out of a permanent Japanese-style zero rate trap, although we can’t even be certain of that.  But faster NGDP growth would still lead to faster RGDP growth.  Still, the recent language is better than nothing, and may have played a modest role in the recent strength in US equity markets.  Later I’ll discuss the risk that the Fed gets lulled into inaction by the “circularity problem.”  I’m sick today, and don’t have the energy to do any more posts, but I will say that in 2009 I called for a worldwide orgy of beggar-thy-neighbor policies, so you pretty much know what I think of the recent moves by the Japanese.

4.  I know there are some very smart grad students who read this blog, and I would appreciate if you could point me to any research papers that discuss supply-side policies when the central bank is inflation targeting and the SRAS is relatively flat.  In the unlikely event there aren’t any, why not write up a paper?

PS:  I have a wacky commenter who is a combination of gonzo journalist Hunter S Thompson and Andrew Mellon.  Even his name (Morgan) is vaguely reminiscent of the gilded age.  This post is dedicated to him.

HT:  Tyler Cowen, JimP, Daniel Carpenter



28 Responses to “The peculiar implications of inflation targeting in an economy filled with slack”

  1. Gravatar of marcus nunes marcus nunes
    24. September 2010 at 12:05

    I said the other day to a friend: If indian smoke signaling were as confusing as Fed signaling, the US cavalry would have “eliminated” them many years before they ended up doing!

  2. Gravatar of Benjamin Cole Benjamin Cole
    24. September 2010 at 12:33

    One request. One first use of acronym (i.e., SRAS), spell out.

  3. Gravatar of marcus nunes marcus nunes
    24. September 2010 at 13:20

    Short Run Aggregate Supply (SRAS)

  4. Gravatar of Andy Harless Andy Harless
    24. September 2010 at 13:39

    I’m puzzled at the general reaction to the Fed statement. It didn’t appear to me to say anything we didn’t already know: we could see that the Fed’s short-range inflation forecasts were lower than its long-range inflation projections, and it has indicated in the past that those long-range projections could be interpreted as targets. I have assumed all along that the expected inflation rates over the short horizon are lower than the Fed would prefer. And yet the Fed continues to forecast such too-low inflation rates.

    So I don’t see how the recent statement indicates that the Fed is targeting inflation any more aggressively than it already was. I don’t see a line at 1%. I see something like a “range of increasing concern” between 2% and, say, negative 1%. That negative 1% is an arbitrary guess, but I assume there is some inflation rate that would put the Fed in full panic mode, where it would move heaven and earth to make sure the inflation rate doesn’t go any lower (although it may not be able to do so without changing its target, which makes the picture complicated). At positive 1%, I think the Fed’s commitment is still half-hearted, and nothing in the new statement changes my opinion. They’ll be more aggressive at 1% than they would at 1.5%, but still not aggressive enough.

    I’m also not convinced that a target at or below 2% is feasible under current conditions, because the natural interest rate may well be less than negative 2%. In that case, the inflation rate cannot rise to 2% with rational expectations, because the ex ante real interest rate implied by a 2% expected inflation rate would be one consistent with disinflation.

    So from my point of view, raising aggregate supply doesn’t help much and may have just the wrong effect (as in the Keynesian Tobin-Mundell Delong-Summers world). It’s interesting, though, that fairly small changes in the Fed’s reaction function and/or the IS curve seem to be able to shift one from a world where aggregate supply shifts have perversely wrong effects to one where they have dramatically right effects.

  5. Gravatar of marcus nunes marcus nunes
    24. September 2010 at 13:39

    A good sign.

  6. Gravatar of Wonks Anonymous Wonks Anonymous
    24. September 2010 at 14:18

    Many Austrians cite 1920-1921 as an example of how we can have recovery even when the Fed is “tight” (the non-Austrian anarcho-capitalist David Friedman is fond of the example as well). But since you evaluate monetary policy by NGDP, you see things differently.

    Harless, surprised to see Mundell on that list. I had heard him described (by Arnold Kling, I believe) as the inspiration for supply-side economics.

  7. Gravatar of Benjamin Cole Benjamin Cole
    24. September 2010 at 14:30

    Marcus–thanks, I looked it up. In any event, it is good policy to introduce acronyms, and invite new readers into the conversation.

  8. Gravatar of Benjamin Cole Benjamin Cole
    24. September 2010 at 14:37

    A key quote from the article cited by Marcus:

    “So, if the U.S. economy today is in a state similar to Japan’s a decade ago, what would the professor recommend? Inflation! In his scholarly view, the Bernanke of 1999 concluded that the Bank of Japan should have announced “a target in the 3-4 percent range for inflation, to be maintained for a number of years.”

    Targeted three or four percent inflation! Now, we hear pettifogging and sermonettes when inflation gets near two percent, or one percent.

    When did we develop a fetish for low inflation and “price stability”? How has this happened?

    Zero inflation is a dangerous utopian pipe dream.

  9. Gravatar of David Tomlin David Tomlin
    24. September 2010 at 15:29

    Scott Sumner:

    Today’s labor markets are nowhere near as flexible, so it would be better to have a bit more monetary stimulus.

    What would you say are the most important causes of this inflexibility?

    I’ve often wondered why labor markets today seem even less flexible than they were in the 1970s, when unions were stronger.

  10. Gravatar of David Tomlin David Tomlin
    24. September 2010 at 16:23

    Benjamin Cole:

    When did we develop a fetish for low inflation and “price stability”? How has this happened?

    George Selgin (HT Silas Barta), seems to think it was in the late 1980s, and it happened ‘by default’.

    When, and how, did a fetish for inflation develop?

  11. Gravatar of scott sumner scott sumner
    24. September 2010 at 16:41

    Marcus, Yes, good point.

    Sorry Benjamin, I’ll try to avoid short cuts.

    Andy, I have to agree with the FT and the others. This is the first time the Fed clearly indicated that they wanted higher inflation. In the past they might point out that inflation was actually a bit below 2%, but then they’d say “inflation is not a problem.” Now inflation is a problem.

    I don’t worry about a low natural real interest rate for a number of reasons:

    1. I’d prefer they target much higher NGDP growth, maybe 7% or 8% until we recover. That would push nominal rates well above zero.

    2. If they do target inflation, they should aim for more than 2% in the short run.

    3. Even 2% is feasible with enough QE. Robert King showed in 1993 that a more expansionary monetary policy can actually raise the equilibrium real interest rate in a model with rational expectations. The real interest rate is sensitive to the expected growth rate. What you are actually arguing (I think) is that it might take a high expected real GDP growth rate to generate a high enough equilibrium real interest rate to get nominal rates up to zero at a 2% inflation target. And that’s right. For all I know we might need 6% expected RDGP growth to reach equilibrium. But surely there is some level of QE that would be expected to raise NGDP enough so that prices were expected to rise by 2%.

    marcus, Weren’t you the one who gave me that Bernanke article a long time ago? If so, you have indirectly spawned all these copycat articles. Krugman did it months later.

    Wonks Anonymous, Yes, and you anticipated my answer.

    David, I don’t really know. In those days people had often experienced bouts of deflation, so they were used to the phenomenon. There were lots of farmers and lots of manufacturing workers without unions. Fewer salaried professionals, who now tend to have very sticky nominal wages. No unemployment insurance and no minimum wages. But I don’t find any of these answers completely satisfactory.

  12. Gravatar of marcus nunes marcus nunes
    24. September 2010 at 17:22

    Yes, it was. I had 2 “big findings”. That Bernanke piece on Japan and the quote on John Williams trying to “save the Fed from being accused of starting the 1937 downturn” that you also turned into a post.

  13. Gravatar of Morgan Warstler Morgan Warstler
    24. September 2010 at 17:45

    Score one for the home team! I’m telling ya, convince neo-liberals that targeting NGDP is the only valid kind of progressive stimulus = win a Nobel.

    This I believe is a carbon copy of MF’s “perfect world” approach to Monetary policy… where the Fed functions to lay bait to Dem administrations to cut fiscal spending.

    As long as the lock down commitment is made to preserve the value of our currency, suddenly the only logical political action is for Obama to become Clinton:

    1. Pressure the public employee unions… 24M currently inflexible employees…. the only inflexible employees (see UAW) the good thing about unions is that the cuts happen fast… in big bites.
    2. Even dreaming about a crisis cut in Minimum Wage, makes me furtively glance up looking for my wife. With this boner, she’s going to think I’m shopping at A**Luxury again.
    3. Aggressive productivity gains in GOV2.0.
    4. Also, I now favor Progressive Corporate Taxes – how come I’m the only one calling for these? very little literature. they are a natural win… a nice fat reason to invest in productivity, and the Bush tax cuts can expire for the rich – liberals should love it.

  14. Gravatar of marcus nunes marcus nunes
    24. September 2010 at 18:07

    Bernanke still “doesn´t get it”. He was just a spectator and now wants to play the engineer.
    How Economics Helped Us Understand and Respond to the Crisis
    “The financial crisis represented an enormously complex set of interactions–indeed, a discussion of the triggers that touched off the crisis and the vulnerabilities in the financial system and in financial regulation that allowed the crisis to have such devastating effects could more than fill my time this afternoon.1 The complexity of our financial system, and the resulting difficulty of predicting how developments in one financial market or institution may affect the system as a whole, presented formidable challenges. But, at least in retrospect, economic principles and research were quite useful for understanding key aspects of the crisis and for designing appropriate policy responses”.

  15. Gravatar of e e
    24. September 2010 at 18:27

    I am probably not getting something but I dont see how this argument wouldn’t apply to federal spending as well. I dont see why raising the demand curve is different than lowing the supply line. I can see why its desirable to avoid the socialist calculator problem, but if keynsians want both (and I think a payroll tax cut is popular amongst them) I don’t see why it would be a revelation to them.

    Last time I commented you and Mark made the argument that if the inflation target is below 2% the economy is particularly vulnerable to negative NGDP shocks. But now that I think about it, it seems like the problem is that the fed doesnt attempt to compensate for past shocks. If the fed announced that it would target a specific inflation path, and made up for shocks as soon as possible it wouldnt matter positive target the fed chose as long as it was positive. Maybe the only problem is that the fed doesnt effectively target a path of inflation and your NGDP or a TIPS target is all thats needed?

  16. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. September 2010 at 20:00

    I’ve often wondered why labor markets today seem even less flexible than they were in the 1970s, when unions were stronger.
    Not to sound like Morgan, but what share was public sector employment than compared to now? Or quasi-public sector, such as education. Is there also a scarcity/keep-hold-of-capital effect? That is, labour is somewhat more scarce compared to capital and more labour has substantial capital embedded in it. These strike me as things worth exploring.

    My impression is that the Australian labour is considerably more flexible now than in the 70s: a result of a mixture of regulatory changes and the surge in forms of self-employment.

  17. Gravatar of Nick Rowe Nick Rowe
    25. September 2010 at 04:08

    If the Fed targets a fixed inflation rate, the AD curve is horizontal in {inflation, real GDP} space.

    If the Fed targets a fixed nominal rate of interest, the AD curve is upward-sloping in {inflation, real GDP} space. (Higher inflation reduces the real rate which increases demand).

    With a Short Run Phillips Curve (OK, SRAS if you like) that is fairly flat, and flatter than the upward-sloping AD curve, the equilibrium is unstable.

  18. Gravatar of scott sumner scott sumner
    25. September 2010 at 06:00

    Marcus, Yes, both of those papers were hugely valuable. I will use both in the paper I plan to present at the AEA meetings in Denver next year.

    Morgan, Why not get rid of the corporate tax entirely?

    And that’s a little more than I wanted to know about you and your wife.


    Marcus, Yes, and the irony is that his advice to Japan was what we needed.

    e, If I read your comment correctly then I agree. The main problem is that they don’t do level targeting. If they had targeted 2% inflation all along, then right now they’d have to be trying to catch-up for the shortfall in inflation.

    In that kind of policy regime, the level of output is determined by supply-side forces.

    Lorenzo, I think that’s part of it, but I also think workers had to be more flexible in the 1970s, because inflation was so unstable. We’ve been lulled by years of stable inflation.

    Nick, That’s right.

  19. Gravatar of David Pearson David Pearson
    25. September 2010 at 06:32

    The epitaph for “Credit Easing”?

    “Although financial markets are for the most part functioning normally now, a concerted policy effort has so far not produced an economic recovery of sufficient vigor to significantly reduce the high level of unemployment.” (from yesterday’s Bernake Princeton speech)

  20. Gravatar of MW MW
    25. September 2010 at 06:43

    The Fed’s comfort zone has, for a long time, been regarded as being somewhere between 1-2%. They now indicate they don’t want inflation below 1%. How is this new information?

  21. Gravatar of David Pearson David Pearson
    25. September 2010 at 06:48

    Also, Bernanke argues–correctly, IMO–that “Credit Easing” already succeeded in moving funds out of safe-haven assets. This was a boon to corporate debt issuance, but unfortunately, it did very little for corporate investment (as companies simply used the proceeds to refinance existing debt or build up cash levels):

    “Mr. Bernanke noted that by withdrawing supply of mortgage bonds on the market, the Fed was able to get investors wanting to hold safe instruments to move into higher-quality corporate bonds, thus lowering yields there.”

    This would seem to support the view that actors have no problem moving out the risk curve. There are plenty of opportunities for companies faced with attractive investment projects to access funds from creditors and invest them. For goodness sake, Petrobras just placed a $70b equity offering! Yet some continue to argue that the issue is “demand for safe haven assets”–some sort of extreme risk aversion.

    “Credit Easing” did not try to directly stimulate AD; it tried instead to produce a working monetary transmission channel. Bernanke’s work on the GD supports the idea that he would be extraordinarily concerned with getting this channel to function. Now it seems that he admits that it is functioning, and therefore he turns to the problem of a shortfall in AD.

  22. Gravatar of Morgan Warstler Morgan Warstler
    25. September 2010 at 07:15

    Scott, if only we could. PCT is a deal the left will grudging strike with the right.

    Think of it as a first step, the low hanging fruit. And the implications and signalling are awesome! This is about serving the interest of “local wealth / local job creators” – meaning not the top .01% or even the top .1% but instead the top 1% – the old school small town bosses.

    The vast majority of the 3% of SMB that makes over half of the small business revenue nationally – the guys the Republicans are basically fighting for… they all get their income passed trough and file as individuals.

    So the left gets to keep taxes high on the top earners, and the SMB guys have a GIANT reason to restructure and keep their profits inside and invested.

    On paper this is basically saying to local rich guys all over the country – keep 35% more of your profits, if you keep taking risks.

    Small newco’s hire the fastest, they make leaps in technology, they do the most creative destruction.

    An idea who’s time has come I tell ya.

  23. Gravatar of Morgan Warstler Morgan Warstler
    25. September 2010 at 07:16

    “The main problem is that they don’t do level targeting. If they had targeted 2% inflation all along, then right now they’d have to be trying to catch-up for the shortfall in inflation.”

    If they targeted 2% all along, they’d have a surplus and be comfy running lower than 2% to make up for it.

  24. Gravatar of TheMoneyIllusion » There’s no experiment capable of showing whether fiscal stimulus works TheMoneyIllusion » There’s no experiment capable of showing whether fiscal stimulus works
    25. September 2010 at 07:42

    […] QE, in order to prevent that from happening.  I won’t repeat all the evidence; my previous post discusses this in a bit more […]

  25. Gravatar of scott sumner scott sumner
    26. September 2010 at 06:34

    David Pearson, Yes, I saw the same thing, and had the same thought.

    MW, The comfort zone was never as low as 1%, they always acted as if they were targeting 2% inflation. That’s why they did easing in 2002, when inflation fell below 2%.

    Here’s what’s changed. Before they said inflation is not a problem. Now they say it is a problem.

    David, Your second comment is excellent.

    Morgan, You might be right, but it also might cause firms to split in two to avoid taxes. The husband runs one and the wife runs another.

    Your second comment is a good one, and is why we need NGDP targeting, not inflation. the inflation of early 2008 was supply side, not demand side.

  26. Gravatar of TheMoneyIllusion » Back to aggregate demand, which has been the #1 problem all along TheMoneyIllusion » Back to aggregate demand, which has been the #1 problem all along
    26. September 2010 at 08:24

    […] time commenter David Pearson recently made a couple of excellent points in the comment section of this post: The epitaph for “Credit […]

  27. Gravatar of Jon Jon
    26. September 2010 at 09:10

    So if small cost reductions can produce big output gains, then small cost increases can produce significant output cuts.

    If that’s the case then the adverse impact of something like the minimum wage increase or the expected tax burden will be much higher than previous studies would otherwise attribute, no?

    I appreciate your willingness to bring up the minimum wage question. The minimum wage steps ‘feel’ like that lined up with sudden step events. i.e., the summer of 2007, 2008, 2009 each marked downward turning points. Since the minimum wage steps have been implemented in late summer each year, there is a qualitative link. Is it superficial? Who knows…

    On a household basis the minimum wage impacts middle-income households. I think this is hard for people to get their heads around. They just assume that the minimum wage has something to do with poverty.

  28. Gravatar of scott sumner scott sumner
    27. September 2010 at 07:44

    Jon, Excellent point.

Leave a Reply