5 ms·
I have this - admittedly very condescending - theory that a large part of the middle class is still "financially illiterate". Wages are hardly ever discounted
by jcfrei 10y ago
I have this - admittedly very condescending - theory that a large part of the middle class is still "financially illiterate". Wages are hardly ever discounted for inflation and thus growing wages (in absolute terms) make most people happy. Even if their purchasing power is declining. As long as there is no sharp increase in prices most people won't complain.
- munificent 10y agoPeople read their pay stubs more often than their grocery bills. You can suck a lot of money out of the middle class by making the latter go up more quickly than the former.
- danans 10y agoMoney illusion is well a known theory, first proposed in 1928, and backed by empirical evidence from behavioral economics: https://en.wikipedia.org/wiki/Money_illusion https://en.wikipedia.org/wiki/Money_illusion
- Terr_ 10y agoI wonder what things would be like if employers were somehow required to adjust pay for inflation by default. I guess they'd just label it a "raise" and take credit. Heck, I'd be happy if Congress would pass legislation to make the minimum-wage automatically adjusted too.
- billions 10y agoHow about the government stops printing money instead? It would have a similar effect on buying power as your suggestion.
- Terr_ 10y agoThat's a little reductive -- there's always going to be some inflation (or deflation) over time, because there's no instant accurate measure of "how much value exists." So making mistakes in inevitable, and it's safer to err towards inflation than deflation.