Phillips curve

It is, visually speaking, quite dramatic how COVID has impacted our friendly Philips curve graph.


It sure looks like (at least!) a bit of a vertical shift (i.e. a labour supply issue) in the making. The larger grey dot is the most recent complete print.

To our mind, it is entirely plausible that COVID solved (impacted) the collective action problem in bargaining for minimum acceptable wage(s) & conditions.

Generous unemployment insurance, significant fiscal transfers (checks to all) and a strong regulatory “you must keep your workers safe” mentality is now combining with resurgent reopening demand (increased labour demand shock) to which works are saying “I won’t work long hours for low pay in a dangerous (or just unpleasant) job without a much higher set of wages and/or benefits.

Amazon, and several other bricks and mortar retail giants (McDonalds, Costco, Walmart) are raising wages well above the minimum (in many instances well above $15 an hour, for jobs that might have paid at or below $10 previously), which acts to raise the floor in many other sectors and states.

From a DAA perspective, we think this manifests, over time, in lower corporate profit margins, which at present, are at all time highs.

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