January 18, 2014
Floyd Norris has an interesting piece showing that apparel prices are now rising more rapidly than other prices, after almost three decades in which they sharply trailed other prices. This is potentially very good news for most of the country’s workers.
The forces at play here are the fall in the value of the dollar and the rise in wages in developing countries, most importantly China. While the availability of low-paid manufacturing workers in the developing world has placed severe downward pressure on wages over the last three decades, as these wages rise this pressure may be alleviated in the years ahead. There is a still a large gap in wages, but the recent relative rise in apparel prices indicates that this gap is narrowing. This will make U.S. workers better positioned to share in the gains of economic growth going forward.
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