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This is only true if a 7% increase in wages causes at least a 7% increase in inflation, which it doesn't. The effect you're describing doesn't shoot up forever,
by brimble 4y ago
This is only true if a 7% increase in wages causes at least a 7% increase in inflation, which it doesn't. The effect you're describing doesn't shoot up forever, but approaches a limit.
- shmatt 4y agoIt's not just wages. Everything that costs money goes up "because inflation". Thus more inflation next month. This is exactly what we're going through with every month the new YoY becoming higher and higher Higher YoY inflation announced -> Companies raise prices on everything -> employees demand an inflation raise -> Higher YoY inflation announced -> ...
- brimble 4y ago> Higher YoY inflation announced -> Companies raise prices on everything -> employees demand an inflation raise -> Higher YoY inflation announced -> ... Yes. This is exactly the cycle that approaches a limit (all else being equal). Inflation-adjusting wages doesn't make inflation keep going up indefinitely.