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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (1531)	4/6/1999 9:24:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Wages in Deflation. This is the response from the Mises Institute about nominal wages in a deflationary environment where the deflation is the result of productivity improvments as opposed to our prior credit contraction experiences. "Nominal wage rates would only fall if there were an increase in the supply of labor, otherwise they would remain constant, despite the fall of product prices. The reason is that the fall in prices would be roughly offset by the very increase in labor productivity that results from the increased capital investment. For example, if prices decline by 10% as a result of a 10% increase in output due to a productivity improvement, the change in nominal wage rates (= % change in marginal product + % change in price) would equal 0."