Friday, November 26, 2010

High Unemployment Restricts Wage Growth

This graph illustrates the effect of the recession on growth in wages. Prior to the recession wages were growing at over 3%. Since the recession wage growth is less than half of its prior rate of growth. The implications on the economy and on deficits is clear. Tax revenues decline with falling wages and high unemployment to promote deficits, and household spending must also decline with falling income to exacerbate recession.

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