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> Raising wages with Consumer Price Index (CPI) is dangerous, because it could cause spiraling inflation! This is only true iff 1) there is no profit margin on

> Raising wages with Consumer Price Index (CPI) is dangerous, because it could cause spiraling inflation! This is only true iff 1) there is no profit margin on the employee and 2) productivity is flat or falling. 1) Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices. 2) If productivity rises then they can pay more, _and_ there ought to be price deflation as supply increase (or some mix of the two) .

jonnycomputer 4y ago
Better to link to productivity then, rather than CPI, perhaps?
- maerF0x0 4y ago
  But what better link to productivity is there than 1) Individual performance compensated (ie work harder get paid more) and 2) Equity share in the business (ie a share of the profits).
  - jonnycomputer 4y ago
    In an ideal world that might be true; but we live in a world in which people are not always paid more for working harder, or are unable to attain equity shares. The truth is that there are systematic, and stubbornly persistent, differences in bargaining power between workers and employers.
Sebb767 4y ago
> Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices. This logic is broken. Of course there's a margin in there, but to keep the business profitable, this margin must stay. So there's not necessarily a cushion to fall back on.
- maerF0x0 4y ago
  That's exactly what pressures do though. They shrink the business' margin. It's unrealistic for businesses to expect their opex to remain perfectly stable under market pressures. Cost of labour, Capital, market forces these all will ebb and flow their profit margins.
  - Sebb767 4y ago
    Okay, maybe I explained it badly. You said that there's always a cushion. Which would still be true after you raise wages. So you can repeat and repeat and you'll end up with infinite wage for 1$ spent. This quite obviously doesn't work, so the point can't be true. Therefore, we can't deduce the existence or the size of a cushion just by the fact that a product is being sold. -- I still agree with your general point; in a lot of industries, there's a lot of cushion right now. But there are also companies operating on razor thin margins (especially when competing with cheap labor overseas). At some point, companies will either raise the price (if they can get away with charging more) or shelf the product. They might also do so if they think the margin is to small; they usually don't create stuff for net zero just to keep employees happy. We simply can't deduce from a general argument how close they are to taking either measure.

jonnycomputer 4y ago

Better to link to productivity then, rather than CPI, perhaps?

maerF0x0 4y ago
But what better link to productivity is there than 1) Individual performance compensated (ie work harder get paid more) and 2) Equity share in the business (ie a share of the profits).
- jonnycomputer 4y ago
  In an ideal world that might be true; but we live in a world in which people are not always paid more for working harder, or are unable to attain equity shares. The truth is that there are systematic, and stubbornly persistent, differences in bargaining power between workers and employers.

Sebb767 4y ago

> Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices. This logic is broken. Of course there's a margin in there, but to keep the business profitable, this margin must stay. So there's not necessarily a cushion to fall back on.

maerF0x0 4y ago
That's exactly what pressures do though. They shrink the business' margin. It's unrealistic for businesses to expect their opex to remain perfectly stable under market pressures. Cost of labour, Capital, market forces these all will ebb and flow their profit margins.
- Sebb767 4y ago
  Okay, maybe I explained it badly. You said that there's always a cushion. Which would still be true after you raise wages. So you can repeat and repeat and you'll end up with infinite wage for 1$ spent. This quite obviously doesn't work, so the point can't be true. Therefore, we can't deduce the existence or the size of a cushion just by the fact that a product is being sold. -- I still agree with your general point; in a lot of industries, there's a lot of cushion right now. But there are also companies operating on razor thin margins (especially when competing with cheap labor overseas). At some point, companies will either raise the price (if they can get away with charging more) or shelf the product. They might also do so if they think the margin is to small; they usually don't create stuff for net zero just to keep employees happy. We simply can't deduce from a general argument how close they are to taking either measure.