I believe David Stockman states that the Fed’s policy of 2% inflation has caused the flight of jobs from the U.S. I’m trying to understand why. I can see that monetary inflation hurts those who get the money later, which can be employees. But if an inflated dollar is a weaker dollar would that not make foreign labor relatively more expensive?
He seems to be arguing that Fed inflation generates disparate effects on various groups of prices. Jobs that are easier to outsource have lower nominal wage increases (I assume because of the competition of foreigners) than jobs that can’t be outsourced. The former, therefore, have stagnant real wages while the real wages of the latter go up.
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