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> Nominal wages are a part of inflation, so there's nothing about the inflation rate that inherently changes real wages Again, no they aren't, the only link wo

> Nominal wages are a part of inflation, so there's nothing about the inflation rate that inherently changes real wages Again, no they aren't, the only link would be that inflation worsens material conditions, which could lead to more people seeking higher wages, which overall improves wage conditions. The only "link" we've seen is recently, and even looking just behind the 2020s you can find inflation causing real wage decreases [1]. > If all components of inflation increased uniformly, purchasing power would stay constant "If" is doing a lot of heavy lifting here. > Inflation is only a drag to the extent that it's surprising. Tell that to people who are un-banked, working minimum wage, or really any average person and see what their response is. > However, there seems to be a relationship between inflation and unemployment. Not sure where you're seeing this, and its hard to try and claim, as we are just now reaching pre-2020 levels of unemployment, not some mythical low level of unemployment. I could see an argument for lowering unemployment leading to higher inflation, but a stable low unemployment has shown no bearing on inflation. > I further conjecture that sustained low unemployment flattens the income curve, leading to higher real wages at the low end. Thats a nice conjecture, but again, just look right before 2020 to find the perfect counter argument, and data coming out from the end of 2022 is showing the opposite[2], that as U6 has reached an all time low (which I will say is not too shabby), real wages have started to slow their growth. > low unemployment is a good thing in its own right I know I'm probably starting to seem combative here, but again, this just isn't always true. For the overall state of our economy and the safety of the wealth of the richest, maybe, but on one end of the unemployment chart it speaks to less people being able to make it by without jobs. Employment among people with disabilities is at its lowest[2], which speaks to our societies inability to care for those who need it. People with disabilities are not going out and finding jobs because bagging at a grocery store is fulfilling, they're doing it because they can't afford not to. On a different note, I'm really not trying to seem combative, and I hope you're enjoying our fake online discussion as much as I am. [1] https://positivemoney.org/wp-content/uploads/2018/02/CPI-inflation-growth-in-money-wages-and-real-wage-growth-1-2.png https://positivemoney.org/wp-content/uploads/2018/02/CPI-inf... [2] https://cepr.net/jobs-2023-1/ https://cepr.net/jobs-2023-1/

xapata 4y ago
The discussion is real enough for me. However, lacking knowledge of the interlocutor brings a few problems. It's hard to know what shared knowledge and context we have. One difference in terms that we're having trouble with is "inflation". When I spoke of "inflation" previously, I meant it in the general sense, not specifically consumer goods prices, or some other subset of prices. By definition, that means that nominal wages are included. The price of labor is just another price that inflates along with everything else. Note that the chart you linked [1] says "CPI inflation" rather than simply "inflation". As for the relationship between unemployment and inflation, it's in a standard economics textbook. Unfortunately, the evidence for the theory has been somewhat mixed.
- jujugoboom 4y ago
  When I say "fake", I hope it comes off in the sense of "not having a bearing on the real world", not trying to diminish anything. > Note that the chart you linked [1] says "CPI inflation" rather than simply "inflation" https://www.brookings.edu/blog/up-front/2021/06/28/how-does-the-government-measure-inflation/ https://www.brookings.edu/blog/up-front/2021/06/28/how-does-... When I'm speaking of inflation, I use the generally accepted definition of "a general increase in prices and fall in the purchasing value of money." This is why in the US we use CPI (and sometimes PCE) to measure inflation, it allows us to track how the prices of goods change, and through that we are (theoretically) able to track what the actual inflation rate over time is. Inflation in the macro sense can come from many places, but in general it is accepted that while wages _should_ keep up with normal inflation of 2% or so in America, that inflation eats away at stagnant wages, and has little direct effect on its own over wages, as evidenced by looking at average wages vs inflation, even in 2022 where the bottom 50% experienced their real wage growth[1]. "Price of labor" is much more theoretical in modern america, as there are many regulations that affect it, along with the much decreased bargaining power of the average worker since the decline in union membership, along with the fact that the average person anywhere in the world is not going to ever "buy labor", its a price that corporations set themselves and pay exclusively, and is therefore already fairly detached from any inflation (yes, I understand that corporate spending is still spending, but that argument starts getting a little trickle-down). As I said before, I can see there being a link between inflation and wage rise, but I still don't see where the root cause could be other than material conditions worsening leading to people fighting for higher wages. I guess in a "we need to fight more for ourselves" sense this isn't terrible, but I think we need to move away from a system where the way to progress is through misery. I will say I was incorrect about the standard view of the relationship of unemployment and inflation, and that historically there has been (and it makes sense for there to be) a link between high inflation and low unemployment. Again, though, there are several ways to look at this, and it depends on where you think the driver of inflation is. If you (informally) believe that inflation comes from supply-side, then its pretty easy to explain the current inflation as we have consistently seen breakdowns in supply chains that have consistently led to lower supply. For demand-side inflation I think an argument could be made there, as with direct-to-consumer stimulus there is more money (along with the same amount of money going into PPP loans for buisness-owners), but looking at real disposable income[2], we are just reaching pre-2020 levels (aside from some very obvious spikes where stimulus checks were). Without extra disposable income across the board, I'm not sure where the extra discretionary spending would come from to increase prices. According to the NY Fed, the inflation was mostly caused by the demand shock (specifically) when recovering from early 2020, and supply-side issues[3]. For more context, I do fancy myself a bit of a work-abolitionist and am horribly left, so it is definitely coloring my takes, but I hope I'm providing enough data for my claims to counteract my inherent bias. [1] https://fred.stlouisfed.org/graph/?g=SCYD https://fred.stlouisfed.org/graph/?g=SCYD [2] https://fred.stlouisfed.org/series/DSPIC96 https://fred.stlouisfed.org/series/DSPIC96 [3] https://libertystreeteconomics.newyorkfed.org/2022/08/how-much-did-supply-constraints-boost-u-s-inflation/ https://libertystreeteconomics.newyorkfed.org/2022/08/how-mu...

xapata 4y ago

The discussion is real enough for me. However, lacking knowledge of the interlocutor brings a few problems. It's hard to know what shared knowledge and context we have. One difference in terms that we're having trouble with is "inflation". When I spoke of "inflation" previously, I meant it in the general sense, not specifically consumer goods prices, or some other subset of prices. By definition, that means that nominal wages are included. The price of labor is just another price that inflates along with everything else. Note that the chart you linked [1] says "CPI inflation" rather than simply "inflation". As for the relationship between unemployment and inflation, it's in a standard economics textbook. Unfortunately, the evidence for the theory has been somewhat mixed.

jujugoboom 4y ago
When I say "fake", I hope it comes off in the sense of "not having a bearing on the real world", not trying to diminish anything. > Note that the chart you linked [1] says "CPI inflation" rather than simply "inflation" https://www.brookings.edu/blog/up-front/2021/06/28/how-does-the-government-measure-inflation/ https://www.brookings.edu/blog/up-front/2021/06/28/how-does-... When I'm speaking of inflation, I use the generally accepted definition of "a general increase in prices and fall in the purchasing value of money." This is why in the US we use CPI (and sometimes PCE) to measure inflation, it allows us to track how the prices of goods change, and through that we are (theoretically) able to track what the actual inflation rate over time is. Inflation in the macro sense can come from many places, but in general it is accepted that while wages _should_ keep up with normal inflation of 2% or so in America, that inflation eats away at stagnant wages, and has little direct effect on its own over wages, as evidenced by looking at average wages vs inflation, even in 2022 where the bottom 50% experienced their real wage growth[1]. "Price of labor" is much more theoretical in modern america, as there are many regulations that affect it, along with the much decreased bargaining power of the average worker since the decline in union membership, along with the fact that the average person anywhere in the world is not going to ever "buy labor", its a price that corporations set themselves and pay exclusively, and is therefore already fairly detached from any inflation (yes, I understand that corporate spending is still spending, but that argument starts getting a little trickle-down). As I said before, I can see there being a link between inflation and wage rise, but I still don't see where the root cause could be other than material conditions worsening leading to people fighting for higher wages. I guess in a "we need to fight more for ourselves" sense this isn't terrible, but I think we need to move away from a system where the way to progress is through misery. I will say I was incorrect about the standard view of the relationship of unemployment and inflation, and that historically there has been (and it makes sense for there to be) a link between high inflation and low unemployment. Again, though, there are several ways to look at this, and it depends on where you think the driver of inflation is. If you (informally) believe that inflation comes from supply-side, then its pretty easy to explain the current inflation as we have consistently seen breakdowns in supply chains that have consistently led to lower supply. For demand-side inflation I think an argument could be made there, as with direct-to-consumer stimulus there is more money (along with the same amount of money going into PPP loans for buisness-owners), but looking at real disposable income[2], we are just reaching pre-2020 levels (aside from some very obvious spikes where stimulus checks were). Without extra disposable income across the board, I'm not sure where the extra discretionary spending would come from to increase prices. According to the NY Fed, the inflation was mostly caused by the demand shock (specifically) when recovering from early 2020, and supply-side issues[3]. For more context, I do fancy myself a bit of a work-abolitionist and am horribly left, so it is definitely coloring my takes, but I hope I'm providing enough data for my claims to counteract my inherent bias. [1] https://fred.stlouisfed.org/graph/?g=SCYD https://fred.stlouisfed.org/graph/?g=SCYD [2] https://fred.stlouisfed.org/series/DSPIC96 https://fred.stlouisfed.org/series/DSPIC96 [3] https://libertystreeteconomics.newyorkfed.org/2022/08/how-much-did-supply-constraints-boost-u-s-inflation/ https://libertystreeteconomics.newyorkfed.org/2022/08/how-mu...