2010-05-03

More Anecdotal Evidence of Inflation

As The Wall Street Journal reports, some companies have begun to increase salaries and dole out raises, based on higher expectations for 2010.
Last year, many CEOs fretted that lean staffing during the recession would burn out employees and spark turnover once the job market improved, but they put very little money behind retention efforts. Instead, they cut or froze pay and made managers rely on no-cost rewards like thank-you notes. By January, employers had started to restore pay cuts and lift pay freezes.

Now, some firms are going a step further by accelerating the distribution of raises and awarding special bonuses to certain employees, say consultants and executives.
The article spends most of its time reasoning that these pay increases are a response to retention concerns and reflect rosier expectations. I pause to wonder aloud whether one can simultaneously address employee retention fears and engage in high expectations. Fear that one's employees will leave is not exactly a rosy expectation.

Wages, as we all know, are the Keynesian benchmark of stimulus efficacy. Now that wages are starting (or may have started) to increase, Paul Krugman can pat himself on the back. Meanwhile, unemployment continues to trudge through the trenches at 9.7%, nationally, and Robert Murphy at the Ludwig von Mises institute has noted some disturbing inflationary trends in bank reserves.

UPDATE:
The WSJ also reports that consumer spending rose twice as fast as incomes in the USA this March. So we continue to be deleriously drunk on stimulus money and refuse to invest our savings in a brighter future. The Keynesians are winning, but beware the crash.