4 ms·
Prices include wages too. If all wages and prices adjusted instantaneously, then there is no real difference between inflation or deflation. However, people ar
by jhj 9y ago
Prices include wages too. If all wages and prices adjusted instantaneously, then there is no real difference between inflation or deflation.
However, people are mentally resistant to being paid less (nominally) for a job, even though in inflation-adjusted terms they would be making the same thing (or more) as they did before. This "wage stickiness" leads to unemployment as companies choose to lay off people instead of paying them more (by holding their wages constant over time), and are also resistant to hiring new people at lower wages while keeping current employees stuck at higher wages, for fear that this would discourage current employees or cause internal conflict.
- pishpash 9y agoThis is baseless speculation. Corporations do and people accept all sorts of things including wage cuts.
- skybrian 9y agoIt may be controversial but it's not baseless speculation. It's a thing economists study, though apparently they've been unable to agree: http://www.investopedia.com/articles/economics/09/wage-stickiness.asp http://www.investopedia.com/articles/economics/09/wage-stick...
- xbmcuser 9y agoMy solution be for let's say Japan would be to peg everything from wages to mortgages to the US dollar. Now with deflation you will be making losses in yen as the value of yen to the $ will keep increasing but in dollar terms and in actual buying strength you will still be improving. Though this will be something very hard to do and everyone would want to keep the yen instead of holding any asset.