Globalization changes everything yet central bankers are still using old models to explain economies.
The old equation was simple. When economies picked up steam, demand for workers increased and companies had no choice but to pay higher wages.
Globalization gives them another choice — move production offshore.
At the same time companies have successfully pushed through temporary worker programs and illegal immigration enforcement is loose.
The combination gives companies every avenue to avoid paying higher wages yet economists still use models that predict wages will rise as unemployment falls and productivity rises.
As this blog points out, the correlation between wage growth and unemployment has fallen to -0.68 from -0.77 since 2000.
The recovery in wages is way behind unemployment