4 ms·

If wage increases cause inflation, then what causes wage increases?

• dominotw 5y ago
  tight labor market?
  • MontyCarloHall 5y ago
    Let’s assume this is the case. Anecdotally [0], I’ve observed (and seen many reports [1]) of the labor market being especially tight in low-margin, low paying industries (e.g. food service, agricultural work, trucking). Perhaps the costs of goods that are now experiencing inflation (dining out, groceries, shipping) were artificially deflated due to severe underpaying of workers. In order to pay people who work in those industries living wages, prices must rise, since margins are so thin that they can’t absorb higher labor costs. Pessimistically, I wonder if this will mean many businesses in those industries will close, since demand will suffer. If wages in the restaurant industry rise significantly (without concordant pay raises across the board), many people will no longer be able to afford to eat out. [0] I recently went to a fast casual Mediterranean place. They recently increased starting pay for workers to $25/hour. A simple pita wrap now costs $15. I went somewhere else. [1] https://news.ycombinator.com/item?id=28834365 https://news.ycombinator.com/item?id=28834365
• deleted 5y ago
  [deleted]
• aeternum 5y ago
  Also inflation. There's definitely a feedback loop and expectations of inflation can be enough to cause inflation.
  • Buttons840 5y ago
    So if wage increases cause inflation, and inflation causes wage increases, how is it more likely that wage increases cause inflation?