The Federal Reserve’s main goals are to have full employment
and stable prices. People feel that the problem is that the Reserve does not
focus on a huge factor that effect their two goals and that is wages. Ms.
Yellen of the Federal Reserve said the main reason why wages are not a bench
mark is because it’s not reliable. Many factors can change wages like
productivity, global competition and technological changes and these factors change
the skill demand and the wages offered to the people.
http://www.nytimes.com/2015/04/08/upshot/its-hard-to-lift-wages-if-the-fed-doesnt-make-it-a-priority.html?ref=economy&_r=0&abt=0002&abg=0
5 comments:
The fed is hesitant to target wages because of their theory on a tightening job market. With a tighter job market comes higher pay demand, which leads to price mark ups by firms to make up their lost profitability from their increased wage costs. However, according to this article it seems that there is no evidence that a wage growth is boosting price growth.
I agree with Ms. Yellen's statement about wages. It is hard to set a bench mark for wages because there are so many different factors that affect where wages need to be set. It is also hard to set a national bench mark because cities are different all over the nation, meaning that cost of living differs greatly all over the nation. I feel as though the Fed's goals of full employment and stable prices are not completely realistic, however, I do feel as though they are partially realistic. I feel as though employment can keep rising, but reaching full employment would be very hard.
I also think it is important to consider that the Fed has two main goals to achieve and not one main goal. Not only does the Fed have to consider how raising wages would impact one goal, it has to consider how raising wages would impact two different goals.
The Feds goals of full employment and stable prices is a difficult task considering the situation. As more people get hired it takes away from firms profitabilities due to more employees or even higher wages. Therefore firms are forced to raise prices to offset this increase in wages or employees making it difficult to have stable prices.
The feds goals seem promising but currently there seems like a lack of overall hope in the job market for many people who are underpaid and to an extent under employed. Although prices may increase and may not be stable I think there is an overwhelming concern for the many people struggling to get a job with a decent wage.
Post a Comment