Do Lower Wages in the US Increase Employment?

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Some GOP politicians are arguing that cutting the number of government workers will help to create jobs in private industry. They claim that this will create more competition for jobs and lower wages. When wages fall, employers will have an incentive to hire more workers.

Krugman explains why that does not work in the US which has its own floating currency and when short term interest rates are already zero. Lower prices increase aggregate demand as follow: There is a lower demand for dollars which leads to lower interest rates which should increase spending. Since interest rates can't go lower than zero, there will be no increase in spending in the US by lowering wages. We get deflation which increases everyone's debt burden because debt must be repaid with more valuable dollars. (Dollars are worth more when they can purchase more at the same price)

In countries that share a common currency like Ireland, lower wages may lead to more employment. For example, Irish workers will be less expansive that German workers who share their currency.