PIMCO’s McCulley Introduces Rich’s Ratio

Anyone expecting to have an interview at PIMCO will want to read chief economist Paul McCulley's latest essay, Principled Populism, because he goes through some of his favorite questions to trip people up, along with what you absolutely shouldn’t say. (A knowledge of Keynes’ General Theory and the presence of mind not to tell prospective employers that you’re untrustworthy will help).

The newest question on the list: “How does a nation’s productivity growth become real wage growth for ordinary citizens, in the context of low inflation and moderate long-term interest rates?”

Rich’s Ratio and real wages

McCulley says that the only way to bring wages up post-Volcker's war on inflation is through a sustained period of economic growth, something that...