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Wage growth has not been keeping up with inflation, and may even be damping it. The steady chorus of claims that wages are too high strikes me as consent-manufa

• refurb 4y ago
  Everybody wants to control inflation until it's time to suppress wage growth. The Bank of Canada even came right and out said that employers should definitely not raise wages quickly. https://www.theglobeandmail.com/business/article-wage-negotiations-inflation-canada/ https://www.theglobeandmail.com/business/article-wage-negoti...
  • mjhay 4y ago
    Weird how government agencies that fall to regulatory capture all keep advocating for things beneficial to the industries they oversee. Sufficient tax increases for the well-off would have the same effect as punishing the working class, but that's never an option for some reason.
    • californical 4y ago
      Not exactly — wealthy people don’t spend most of their money on goods & services, they leave it parked in investments. Reducing a wealthy person’s net worth don’t really affect how much they spend on consumer goods. A poor or working-class person spends (nearly) all of their money on consumer goods. Give them 10% more money and they try to buy 10% more things. Restricting money on the wealthy doesn’t reduce demand for GPUs for example, but restricting money on low-middle income people does. That lower demand for consumer goods is how you can slow inflation.
      • soulofmischief 4y ago
        Then tax the wealthy and put that money into the hands of people who actually need it.
        • californical 4y ago
          Well that causes inflation, was my point, because that money wasn’t (isn’t) being used to compete for consumer goods. But by redistributing it to lower and middle class, it’s now being spent on consumer goods, increasing demand for the goods, causing inflation.
    • ethbr0 4y ago
      > Sufficient tax increases for the well-off would have the same effect as punishing the working class Would they? From an economic perspective (not a social/fairness one), isn't it well studied that consumption (as percentage of income) is inversely proportional to higher/lower total income? So raising tax on the well-off would be more akin to raising the prime rate (i.e. decreasing the amount of well-off capital that's reinvested elsewhere) with the added effect of increasing consumption by increasing federal government spending. Note: I'm not opining on the justness of this, simply the mechanism.
    • mjhay 4y ago
      replying to californical: "Sufficient" is the operative word here. There's a tremendous amount of non-productive rent-seeking, such as literal rents. These are a massive drag on our economy, because they shift investments towards non-productive use. More targeted tax increases to discourage the worst rent-seeking would help a lot, in addition to generating revenue and easing price pressures.
      • kodah 4y ago
        imo, this is actually a fairly salient point. Wealthy people do put most of their cash in investments but not all investments are equal to the health of the economy or as detrimental if toyed with.
  • smnrchrds 4y ago
    Bank of Canada's position is very nuanced, but all the nuance is ignored by their critics. They never asked employers not to raise wages this year. They asked them not to bake in e.g. 8% per year wage increase for the next 10 years if they are negotiating a long term contract with a union. The rationale is that while 8% raise this year is reasonable given the inflation rate, the inflation rate will not remain high for the next decade, so it will be too high further in the future. If many bind themselves with high wage increases long term, we will have high inflation for a long time due to the effect of the cost of labour on prices. > “Don’t build that into longer term contracts. Don’t build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down.”
    • 0xbadc0de5 4y ago
      Thank you for pointing this out. As much as I like to criticise the government (in many cases, well-deserved), it's important to keep a nuanced perspective and reserve criticism for cases that indeed warrant it. Not basing long term contracts on short term economic fluctuations seems like a reasonable policy. If you're going to account for inflation in a contract, I believe indexing is the preferred method anyway. Many government pensions - and some salaries - are indexed to inflation.
    • soulofmischief 4y ago
      Since wage hikes historically have not matched inflation, I don't see anything wrong with hikes that surpass inflation rates. We have a lot of catching up to do, and incumbents designed this system so that healing the gap hurts the bottom line of voters, so there is simply no painless way out of it. We've all been paying towards a debt that is about to be realized.
    • refurb 4y ago
      Not sure that's much better? Tiff also said "inflation is transitory", but hey, here we are. And if I'm a union guy negotiating my next 3 year contract and I listen to Tiff and only get 8% this year, then 3% the next two years, is Tiff going to pay the difference when inflation isn't under control?
  • Ericson2314 4y ago
    No the wise ones realize the very framing of "inflation" is bad. One has to look at which specific prices are rising, and production input output graphs.
• behaveEc0n00 4y ago
  https://www.nytimes.com/1997/02/27/business/job-insecurity-of-workers-is-a-big-factor-in-fed-policy.html https://www.nytimes.com/1997/02/27/business/job-insecurity-o... Agreed. They were more frank about it back in the day. If everyone has enough money the masses can create/buy assets to capitalize on rather than merely be worker bees.
• jmoak3 4y ago
  Wages are too high, because our entire economy is built on the backs of available race to the bottom international labor. Demographics and the security situation is changing this, and the establishment (for better and worse) is absolutely freaking out. The world as we have lived it the past 30 years cannot exist if people doing labor can command a decent wage by USA standards, we’re going to have to recalibrate for a while
  • MonkeyMalarky 4y ago
    That's why you import labour en mass, pay them less and kick them out when you're done with them. At least that seems to be my country's solution? Literally a permanent underclass of temporary foreign workers propping up parts of the economy.
    • givemeethekeys 4y ago
      If by your country you mean, Singapore, then yes. It works because foreign exchange is likely in Singapore's favor. People who come can be indentured servants and help out a lot of people back home. At some point though, the tide begins to turn and you have to find new sources of cheap labor. But, what happens when the sources run dry?
      • rightbyte 4y ago
        Qatar would be the prime example?
        • givemeethekeys 4y ago
          Definitely - some of the Arab countries - Qatar, Kuwait, the UAE.
      • csomar 4y ago
        The world is big and never seems to be running of countries going bankrupt or going into chaos. You'll always find new people. Also, Africa just opened the gates for tons of new labor.
• Aunche 4y ago
  >The steady chorus of claims that wages are too high strikes me as consent-manufacturing by capital. It's the opposite actually. The Fed is raising interest rates to contract the money supply, which will temper inflation. They acknowledge the negative impacts it will have to unemployment and wages, but if you read their press releases, you can tell it's clearly not their intent. Meanwhile, the MSM is spinning it as them wanting to stop wage growth to spark populist outrage and get more clicks. It's a shame that everyone is intent on badmouthing one of the only somewhat competent parts of the government. The Fed is an easy target because they don't play petty politics. First Trump pressures the Fed to reverse quantitative tightening. Then, during the pandemic, the Republicans badmouth the Fed again for "printing money." Now, the left is criticizing them for "planning to sharply boost unemployment".
  • NeverFade 4y ago
    It's easy to scapegoat the Fed for the ongoing recession and inevitable layoffs.
    • PaulDavisThe1st 4y ago
      What recession? Measured with what metrics?
      • pclmulqdq 4y ago
        Two consecutive quarters of negative growth is the standard definition used around the world. Except in the US today.
        • PaulDavisThe1st 4y ago
          Current economic metrics are all over the place following the worst global pandemic in a century. It's true that the metric(s) typically used to define/measure growth are down as you describe, there are lots (and lots) of related metrics that say something quite different. I think overall it's most accurate to suggest that we're in a strange time indeed, not just a repeat of the last 3 or 5 recessions.
• rufus_foreman 4y ago
  From your first link: "Nominal wage growth has been fast over the past year relative to the past few decades, but it has lagged far behind inflation, meaning that labor costs are dampening—not amplifying—price pressures" This is not necessarily true since it doesn't take into account labor productivity. From the BLS: "Unit labor costs in the nonfarm business sector increased 10.2 percent in the second quarter of 2022, reflecting a 5.7-percent increase in hourly compensation and a 4.1-percent decrease in productivity. Unit labor costs increased 9.3 percent over the last four quarters. This is the largest four-quarter increase in this measure since a 10.6-percent increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them." From your second link: "At the state level, we can do more and, frankly, we should have done it a long time ago. The 'Inflation Relief and Consumer Assistance Plan' (A.8481), which was introduced by Leader Barclay, would slash state sales tax for two years on everything from gas to groceries to utility bills. This would provide immediate and meaningful relief. The windfall in state sales tax revenue could easily be covered by surplus money from the federal government." So during a period of inflation and rising interest rates, they are advocating fiscal stimulus financed by government debt. You think that is a good idea?