Monday, June 4, 2012

Where Is Labor On Monetary Policy?

This weekend, I was at a fundraiser where I had a chance to meet lots of politically active labor union people.  I asked a couple of them whether they had any views on monetary policy and interest rates.  The most they could say is "We don't like bankers."  I understand that!  But I was hoping that these guys would have more developed views on the issue.  

The big tradeoff in monetary policy is full employment versus low inflation.  I'd expect that labor people would care about full employment.  And I'd also expect that they wouldn't share the interests of rich people with lots of cash, so low inflation wouldn't be such a big priority to them.  In fact, central bankers regard higher wages as a form of inflation -- wage inflation.  This makes anti-inflation Fed governors direct opponents of the higher wages that unions would like.  

In the US (and Europe) we've gotten into a situation where central banks are excessively concerned with inflation, and unconcerned with very high unemployment.  It's a terrible situation from the point of view of progressive interests in general, and especially from the view of labor unions, which want more jobs.  I wonder if things would be better if labor was using its political muscle to tell policymakers that it wanted pro-employment central banking.  
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