Economy: G-20 To Meet About Continuing Financial Support
• "The Group of 20 leading nations will agree this weekend it is too early to pull the plug on emergency support for the global economy and launch a new system of checks to help rebalance world growth and prevent future crises," Reuters reports. "British finance minister Alistair Darling is hosting the third meeting of G20 finance ministers and central bankers this year in St Andrews, Scotland" today, "aiming to put flesh on the bones of agreements made at a leaders' summit in Pittsburgh in September."
• "A senior House Democrat said Thursday he would push to extend unemployment insurance benefits through all of 2010 before the end of this year, when the eligibility window for new enrollees will shut down or begin to phase out for existing beneficiaries," CongressDailyAM (subscription) reports. "The projected cost of such a program is potentially $80 billion to $85 billion, according to preliminary estimates."
• "No large financial firm should be too big to fail, said two members of the U.S. Senate Banking, Housing and Urban Affairs Committee," Bloomberg News reports. Republican Bob Corker of Tennessee and Democrat Mark Warner of Virginia "are sponsoring legislation to give the Federal Deposit Insurance Corp. the authority to force large bank holding companies into receivership. Any firm that benefits from a government-funded orderly wind-down would be required to close its doors permanently to avoid a perpetual series of government bailouts."
How much of a factor in the downturn have been sticky wages and prices? Can you point to sticky wages affecting the level of employment in particular industries, or sticky prices further dampening demand for some goods and services? Is there anything that government could do to effectively unstick wages or prices? Does the incidence of stickiness indicate that unionization (which is at historically low levels) isn't as much of a factor in sticky wages as once thought?
-- John Maggs, NationalJournal.com
Responded on March 10, 2009 2:57 PM
James K. Galbraith, Professor of Economics, University of Texas
Litan makes a point: this topic will provide future employment to economists.
Otherwise, to say that sticky wages (or prices) play a role in unemployment is a bit like blaming gravity for the collapse of a bridge. It's not of any use to the civil engineers.
Responded on March 2, 2009 10:11 AM
Robert Litan, Vice President of Research & Policy, Kauffman Foundation
My impression from anecdotal reports -- in the media and in personal conversations -- is that employers are more willing to offer wage cuts in lieu of layoffs, and employees more willing to accept them, in this downturn than in any previous recession of my lifetime. To the extent this occurs, this will mitigate an otherwise horrific decline in employment. In future years, I suspect there will be a number of economists who will be sifting through the data to whether and to what extent wage cutting in fact has happened.