Melanie Long calls attention to figures that will affect the economy in 2022
Melanie Long, assistant professor of economics at The College of Wooster, called attention “real weekly earnings” and their impact on the cost of consumer goods in an article published by several media outlets after the New Year. The piece, “Inflation, workforce participation and real wages: 3 key indicators for monitoring the economy in 2022” highlights tools that economists are using to understand how the economy will do in 2022.
Long, whose research includes household finances, wrote that she’s studying real weekly earnings rather than average weekly earnings because the former accounts for the cost of consumer goods. When prices rise, families will be forced to purchase less when they are paid the same amount as before. “The prices of everything from used cars to chicken are rising at the fastest rate in a decade,” wrote Long. “These increases will cut into families’ buying power and threaten to stall an already slow economic rebound.” Their real earnings will decrease due to the price of consumer goods.
Long says that she has reason to believe that real weekly earnings will increase soon due to the continued labor shortage. She notes that many service workers are quitting their jobs to look for better pay with other employers. Because of the labor shortage, some companies feel that they must raise their wages to attract employees. Those increases may be temporary, as economists are concerned that these wage hikes may result in a “wage-price spiral,” which occurs when employers raise the prices of consumer goods to pay for the wage hikes.
By paying attention to the real wages being made rather than earnings at face value, the impact of the increase in prices will be accounted for. “The direction that real earnings take in 2022 will have a major impact on families’ spending and the pace of economic growth. Consumer spending makes up nearly 70% of U.S. economic activity each year,” Long noted, adding that she’ll continue to watch this number carefully this year “to see how the competing forces of increasing prices and rising wages ultimately shape the fragile pandemic economic recovery.”
Published Jan. 11, 2022.
Posted in News.
Related Areas of Study
Learn how humans organize to sustain life and enhance its quality from a diversity of economic perspectivesMajor Minor