BPEA | 1989 No. 2

Wage Pressures and Labor Shortages: The 1960s and 1980s

Daniel J.B. Mitchell
Daniel J.B. Mitchell University of California, Los Angeles

1989, No. 2

As THE U.S. unemployment rate fell during 1988 and early 1989 into the
5-5.5 percent range, observers worried about upward pressure on wage
inflation. The concern grew naturally out of the experience of the 1970s,
when wage inflation accelerated whenever the unemployment rate fell
into the 6-7 percent range. But while such concern is understandable, it
may be misplaced. Imagine an economic historian painting the following
broad picture of the American labor market.