Friday, April 24, 2020

What Happens If After the Lockdown Workers Don't Come Back to Work?

David Burns emails:
I have not seen this considered much, and maybe that's because it's a non-issue, but what happens if after the economy is reopened productivity continues to stall because the workers are still too terrified of the virus to engage in normal productive work activity?
RW response:

This may become a real problem. If the government continues to pay non-workers enough so that they don't feel the pressure to go back to work. So it is probably not the fear as much as a comfortable non-working option.

Of course, if you have a situation with less productivity because of fewer workers and at the same time the Fed is pumping in massive amounts of money, including to those who are not working, the very likely outcome is strong price inflation.

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