4 ms·

It is just causal that higher wages are inflationary. Reasons: - People will spend more with higher wages - Companies will pass over the higher costs to the c

It is just causal that higher wages are inflationary. Reasons: - People will spend more with higher wages - Companies will pass over the higher costs to the customers

SantalBlush 4y ago
Higher wages will definitely cause some inflation, I agree. My point is simply that household saving also has the potential to increase, which is a very good thing and often overlooked in this scenario. One problem is that real interest rates have been negative for some time, which is bad for inflation and for saving, but that is beyond the control of wage earners.
- ianai 4y ago
  You’re both missing a key point. The labor market likely priced labor below the market clearing rate. If people aren’t filling positions at a specific wage level then up the wage level. Laborers have a willingness to work for each level of wage and it’s going to increase with wage.
  - MichaelRazum 4y ago
    Nah, don't think so. With such low unemployment you basically have full employment, that is how economist would describe the situation since it can't got to 0%. Now the wages go up, since you have more competition for labor force and of course people want higher wages based on inflation. PS: Sure, more people retired and the labor participation rate is lower then before covid. BUT you will not get them back to work with an increase of 10% or let's say 20% in salary. They retired, that's it.
    - ianai 4y ago
      Yea the data support retirees being a stronger factor as discussed here: https://news.ycombinator.com/item?id=34554546 https://news.ycombinator.com/item?id=34554546 But raising pay does still increase the number of people willing to work across the market. It’s also basically the only direct way to increase the labor pool without exogenous or distant factors to the labor market. Raising interest rates would affect the labor market by diminishing financing to the point demand for labor falls. It’s a blunt/economy wide instrument. Labor did enjoy increased market demand and increased wages after the 1918 pandemic. Historically, not wanting to raise wages just reads as sour grapes.
- qualudeheart 4y ago
  You’ve given me an idea. If widespread automation drives down wages, it should also lead to deflation. That should make welfare programs cheaper as the State needs to pay out less money to welfare recipients.

It is just causal that higher wages are inflationary. Reasons: - People will spend more with higher wages - Companies will pass over the higher costs to the customers

SantalBlush 4y ago

Higher wages will definitely cause some inflation, I agree. My point is simply that household saving also has the potential to increase, which is a very good thing and often overlooked in this scenario. One problem is that real interest rates have been negative for some time, which is bad for inflation and for saving, but that is beyond the control of wage earners.

ianai 4y ago
You’re both missing a key point. The labor market likely priced labor below the market clearing rate. If people aren’t filling positions at a specific wage level then up the wage level. Laborers have a willingness to work for each level of wage and it’s going to increase with wage.
- MichaelRazum 4y ago
  Nah, don't think so. With such low unemployment you basically have full employment, that is how economist would describe the situation since it can't got to 0%. Now the wages go up, since you have more competition for labor force and of course people want higher wages based on inflation. PS: Sure, more people retired and the labor participation rate is lower then before covid. BUT you will not get them back to work with an increase of 10% or let's say 20% in salary. They retired, that's it.
  - ianai 4y ago
    Yea the data support retirees being a stronger factor as discussed here: https://news.ycombinator.com/item?id=34554546 https://news.ycombinator.com/item?id=34554546 But raising pay does still increase the number of people willing to work across the market. It’s also basically the only direct way to increase the labor pool without exogenous or distant factors to the labor market. Raising interest rates would affect the labor market by diminishing financing to the point demand for labor falls. It’s a blunt/economy wide instrument. Labor did enjoy increased market demand and increased wages after the 1918 pandemic. Historically, not wanting to raise wages just reads as sour grapes.
qualudeheart 4y ago
You’ve given me an idea. If widespread automation drives down wages, it should also lead to deflation. That should make welfare programs cheaper as the State needs to pay out less money to welfare recipients.