Charles Goodhart argues that a labor shortage is coming

The big picture story that was doing the rounds yesterday was a report from for BOE official Charles Goodhart. His basic argument is that wages will rise for workers because an aged Western workforce will have fewer workers and that cheap Chinese labor is maxed out. Ambrose Evans-Pritchard breaks it down further.

It has grabbed attention because of over-the-top phrases like "We are at a sharp inflexion point," and "Piketty was wrong." It does a good job of arguing why there's no inflation but fails to make a compelling case for why it will change.

First, wages are still cheap in China and if it gets expensive, there are always neighbouring countries with massive untapped potential along with India and Africa.

Second, he underestimates technology. Billions will be invested in automating low-wage workers before any meaningful wage gains.

Third, the aging population paying more for services from a dwindling workforce isn't inflationary. It's simply a transfer of wealth. It's good for the working cohort but leaves seniors with less disposable income.