Mario Draghi, of the European Central Bank, wants to keep stimulus efforts going, even with low oil and gas prices (even in Europe) having a dragging effect on inflation. Here’s the kicker, though:

Central bankers sometimes ignore falls in oil and food prices, arguing they are highly volatile and often beyond their influence because they are formed by global market forces. But Mr Draghi said the governing council is worried that a long period of low oil prices may lead to declines in the prices of other goods and services, and perhaps wages, through what central bankers term “second-round effects.”

I’ll disregard the premise that a long period of low oil prices is inherently deflationary, rather than just leading to a period of adjustment to a new, lower-cost equilibrium. My question for Draghi is what’s the down side of wages falling in a deflationary environment, even one that is merely a move to a lower-cost equilibrium?

Sure, no one likes to see a smaller paycheck, but this is a political question, not an economic one. However, if prices of goods and services are falling, no buying power is lost with that smaller paycheck. On the other hand, if wages don’t fall more or less along with those other prices, the outcome is a higher wage cost for the employer than the market value of what he and his employees produce. And that leads to job loss. Now we have a (new, relatively) high paycheck that has no value at all because the out of work ex-employee isn’t getting it.

Further, if I’m wrong, and a long period of low oil prices is, in fact, inherently deflationary, the producers can’t sell at all, as the buyers simply wait for prices to fall further before buying. If wages don’t fall commensurately in this environment, not only will jobs be lost, but many producers, unable to sell, will go out of business. And all of that company’s jobs will be lost.

In either case, employment is the second-round effect with which bankers like Draghi should concern themselves.