Tom Parker says:
February 19 2020 at 11:15 am
‘ I really cannot see the price of labour rising significantly though: in sectors such as care and hospitality margins are already very small and there is strong price inelasticity ‘
Strong price inelasticity means that demand doesn’t change much in response to a change in price. Surely therefore there is ample room for wages to rise without affecting demand.
Richard Murphy says:
February 19 2020 at 11:23 am
How does that work when businesses are on tight margins Tom?
Nick Carroll says:
February 19 2020 at 11:51 am
Tom Parker is right about the definition – if demand is price-inelastic, it doesn’t change much in response to a change in price.
The sectors that you mention are highly competitive, hence the low margins. Demand may well still be price-inelastic at the sector level, if the whole sector experiences higher wage costs – probably true for care, and perhaps for hospitality as well.
Do note that Richard Murphy was employed to teach economics at a British university just recently.