[quote=SD Realtor]Well wage inflation is not an entitlement. If you look at previous periods of wage inflation, they were due to strong economic growth. Our growth has been tepid and the most growth we have seen is in the public sector. Mortgage rates are not indexed to wage inflation, they are essentially indexed to treasury yields. Monetizing debt has been the strategy. As long as that keeps happening the lid stays on. Also for many many housing markets a hefty rise in rates will hurt but be tolerable. For those markets with severe price premiums well above median incomes there will be depreciation.[/quote]
Just wanted to correct this because it’s a pretty popular (but entirely incorrect) meme.
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“Private Industry Workers
Compensation costs for private industry workers increased 1.7 percent over the year. In March 2012 the
12-month increase was 2.1 percent. Wages and salaries increased 1.7 percent for the current 12-month
period. For the 12-month period ending March 2012, the increase was 1.9 percent. The increase in the
cost of benefits was 1.5 percent for the 12-month period ending March 2013, down from the
March 2012 increase of 2.8 percent.
Among occupational groups, compensation cost increases for private industry workers for the
12-month period ending March 2013 ranged from 1.6 percent for sales and office occupations and
service occupations to 1.9 percent for natural resources, construction, and maintenance occupations.
Among industry supersectors, compensation cost increases for private industry workers for the current
12-month period ranged from 0.9 percent for leisure and hospitality to 2.2 percent for information.
State and Local Government Workers
Compensation costs for state and local government workers increased 1.9 percent for the 12-month
period ending March 2013. In March 2012 the increase was 1.5 percent. Wages and salaries increased
1.0 percent for the 12-month period ending March 2013, the same as the March 2012 change. Prior
values for this series, which began in June 1982, ranged from 1.0 percent to 8.5 percent. Benefit costs
increased 3.5 percent in March 2013, up from the March 2012 increase of 2.3 percent.”
“Even modest increases will likely make a big difference to state employees, many of whom haven’t seen significant pay increases since the recession began in 2008. State and local government wages grew by 1.1 percent in 2012, compared to 1.7 percent growth in the private sector, according to data from the Bureau of Labor Statistics. State and local governments have shed 681,000 jobs since their peak in August 2008, by far the largest drop of any recession in the past 50 years, according to the Rockefeller Institute of Government.”
“Educators and government employees will miss out. Teachers at all levels and public-sector employees — think postal workers — will see the smallest raises, averaging 2.1 percent, Chou says.”
Other than that, I agree with you about wage inflation, in general. Probably not going to happen on a wide-scale basis, especially not enough to offset possible interest rate increases.
