PORT WASHINGTON, N.Y. (MarketWatch) -- Which is worse, wages that keep up with inflation or wages that don't?

Nowadays, a lot of comparisons are being made to the 1970s. This is because the U.S. economy is once again in the throes of stagflation.

The combination of little or no growth (stagnation) and rapidly rising prices (inflation), the term stagflation was first coined by Iain Macleod, the chancellor of the exchequer, in a speech to the House of Commons in 1965.

He said, "We now have the worst of both worlds -- not just inflation on one side or stagnation on the other, but both of them together ... sort of a stagflation situation."

At first glance, it does appear to be déjà vu all over again.

The economy has barely grown over the past six months, leading to falling employment and a jump in the jobless rate. Meanwhile, consumer prices are up nearly 4% over the past year with energy, food and health care -- the mainstays of most households -- rising several times faster.

Not surprisingly, inflation psychology has begun to heat up. As I reported two weeks ago, consumers now expect prices to rise a whopping 5.2% over the next year -- the most since the bad old days of 1982. See May 26 column

But are they doing anything about it, such as buying in advance or demanding higher wages? The answer, from what I can tell, is no.

Hoarding is impractical for most. In the case of goods like food or energy, most have no room; in the case of services such as health care, they can't. And, of course, their buying power is falling because wages are not keeping up with the jump in prices.

Now there are some who console themselves that wages are still rising at a modest pace. They maintain that the lack of a wage-price spiral suggests that little or no growth will eventually overwhelm inflation and cause many prices to rise more slowly, if at all.

Others, however, regard this more ominously. And this is where I come down.

I remember that back in the 1970s, when the 1973-74 oil shock forced price inflation into double-digits (10% or more), it was not uncommon for employers to give their workers pay hikes equaling or exceeding the rate of inflation. Along with more comprehensive medical care and employer-financed defined-benefit pensions, this enabled those who held onto their jobs to maintain their buying power.

Today, on the other hand, raises are more like 2-4% -- and I don't have to tell you what's happened to such fringe benefits as medical care, pensions and the like.

Keep in mind, also, that unlike the 1970s, corporate America has gone through several waves of employment reductions.

Whether triggered by increased productivity, mergers or by the lure of lower labor costs overseas, the social contract between employers and employees is not what it used to be. This has made workers more quiescent, when it comes to asking for enough of a raise to keep up with inflation.

Thus in lieu of wage inflation, we have wage deflation. And given that consumers account for over two-thirds of economic activity, this does not bode well for the economic outlook.