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So, that means pay reduction for all employees this year right? unless there's suddenly a inflation->deflation transition?

by olliej 3y ago

bigmattystyles 3y ago
You'll probably get a 'but your equity grew at 30%' from management as a justification. Which is BS, but it's a fig leaf.
giantg2 3y ago
I've been dealing with pay reductions via inflation for years. I probably lost 7% over the past 2 years.
- ChuckNorris89 3y ago
  IKR? A stagnating wage means you're actually taking a yearly pay cut, and inflation adjustments actually mean a stagnating wage. It was less noticeable before the pandemic because only assets were growing faster than inflation while food and goods seemed to stagnate, but now everything is booming. Consider that other professions have less bargaining power than SW devs. I'm thinking about moving to Belgium where I hear salaries are automatically indexed by inflation.
jollyllama 3y ago
The deflation has begun, if you look at M2 money supply. But food is not going to decrease in price, and housing will lag. So it'll still feel like inflation, but consumer goods are already going down.
- boredumb 3y ago
  What? They just reported 4.9% inflation this morning.
  - refulgentis 3y ago
    2nd deriv is negative and we're likely to overshoot, hence, the decision and article about it
    - wadd1e 3y ago
      2nd derivative being negative doesn't mean inflation is becoming deflation though, it just means that the rate of change of inflation is decreasing, but the inflation(and rate of change of inflation)itself will still be positive(unless I'm misunderstanding something, which is entirely possible).
      - refulgentis 3y ago
        You're not wrong, it's one of those "HN traps": we're smart, and we can apply that other places, and even find other people who will back up our findings and agree. But colloquially, in the actual field, people expect something different. Makes it hard to converse because _nobody_ is wrong here: i half-assed my way through an economics degree and know just enough to know OP is making a relevant comment, then confirm their comment: M2 money supply, is in fact, decreasing.
      - brewdad 3y ago
        The reported number is backward looking year-over-year. A 4.9% rate says the price of their basket of goods is that much more expensive than it was a year ago. Last month the inflation rate was 5% when compared to March of 2022. So, in a sense, goods are becoming cheaper. In absolute terms, groceries, airline fares, new cars, hotels and household energy (such as electricity, fuel oil and utility gas service) are actually cheaper than they were a month ago[1]. [1] https://www.cnbc.com/2023/05/10/april-2023-cpi-inflation-report.html https://www.cnbc.com/2023/05/10/april-2023-cpi-inflation-rep...
- olliej 3y ago
  (1) It doesn't matter if the economy will be subject to deflation in future, right now it is not, and while later in this thread you talk about 2nd derivatives being negative that just means the rate growth of inflation is dropping, not inflation itself, so excusing below inflation compensation changes is BS. (2) If/when deflation does occur, we know from prior instances the reduction in worker compensation is much higher than the rate of deflation. I don't get this attempt to represent below inflation compensation changes as ok because one day in future some economic change will make this years actions "reasonable", because that is assuming that this year is a one off, rather than recurring. It also presumes that wages won't be cut even more when deflation occurs (generally by mass layoffs and then rehiring the now unemployed when their choices have been reduced to "homeless vs lowered pay"). We also know that businesses don't actually foresee a problem with deflation as they're still happily giving mass payouts and wage increases to their executive management, performing stock buy backs, and issuing large dividends. If companies were actually legitimately concerned about the potential for a deflationary event they would be hoarding cash.
  - jollyllama 3y ago
    >If companies were actually legitimately concerned about the potential for a deflationary event they would be hoarding cash. Or freezing salaries. Just like in the article. I don't really have an answer for you with regards to any stock buybacks or large dividends. I'm not talking about anything as reasonable or mentioning the 2nd derivative myself. M2 money supply is a specific thing that is responsible for money creation, it's going down now for the first time ever. We are in uncharted territory.

So, that means pay reduction for all employees this year right? unless there's suddenly a inflation->deflation transition?

by olliej 3y ago

So, that means pay reduction for all employees this year right? unless there's suddenly a inflation->deflation transition?

bigmattystyles 3y ago

You'll probably get a 'but your equity grew at 30%' from management as a justification. Which is BS, but it's a fig leaf.

giantg2 3y ago

I've been dealing with pay reductions via inflation for years. I probably lost 7% over the past 2 years.

ChuckNorris89 3y ago
IKR? A stagnating wage means you're actually taking a yearly pay cut, and inflation adjustments actually mean a stagnating wage. It was less noticeable before the pandemic because only assets were growing faster than inflation while food and goods seemed to stagnate, but now everything is booming. Consider that other professions have less bargaining power than SW devs. I'm thinking about moving to Belgium where I hear salaries are automatically indexed by inflation.

jollyllama 3y ago

The deflation has begun, if you look at M2 money supply. But food is not going to decrease in price, and housing will lag. So it'll still feel like inflation, but consumer goods are already going down.

boredumb 3y ago
What? They just reported 4.9% inflation this morning.
- refulgentis 3y ago
  2nd deriv is negative and we're likely to overshoot, hence, the decision and article about it
  - wadd1e 3y ago
    2nd derivative being negative doesn't mean inflation is becoming deflation though, it just means that the rate of change of inflation is decreasing, but the inflation(and rate of change of inflation)itself will still be positive(unless I'm misunderstanding something, which is entirely possible).
    - refulgentis 3y ago
      You're not wrong, it's one of those "HN traps": we're smart, and we can apply that other places, and even find other people who will back up our findings and agree. But colloquially, in the actual field, people expect something different. Makes it hard to converse because _nobody_ is wrong here: i half-assed my way through an economics degree and know just enough to know OP is making a relevant comment, then confirm their comment: M2 money supply, is in fact, decreasing.
    - brewdad 3y ago
      The reported number is backward looking year-over-year. A 4.9% rate says the price of their basket of goods is that much more expensive than it was a year ago. Last month the inflation rate was 5% when compared to March of 2022. So, in a sense, goods are becoming cheaper. In absolute terms, groceries, airline fares, new cars, hotels and household energy (such as electricity, fuel oil and utility gas service) are actually cheaper than they were a month ago[1]. [1] https://www.cnbc.com/2023/05/10/april-2023-cpi-inflation-report.html https://www.cnbc.com/2023/05/10/april-2023-cpi-inflation-rep...
olliej 3y ago
(1) It doesn't matter if the economy will be subject to deflation in future, right now it is not, and while later in this thread you talk about 2nd derivatives being negative that just means the rate growth of inflation is dropping, not inflation itself, so excusing below inflation compensation changes is BS. (2) If/when deflation does occur, we know from prior instances the reduction in worker compensation is much higher than the rate of deflation. I don't get this attempt to represent below inflation compensation changes as ok because one day in future some economic change will make this years actions "reasonable", because that is assuming that this year is a one off, rather than recurring. It also presumes that wages won't be cut even more when deflation occurs (generally by mass layoffs and then rehiring the now unemployed when their choices have been reduced to "homeless vs lowered pay"). We also know that businesses don't actually foresee a problem with deflation as they're still happily giving mass payouts and wage increases to their executive management, performing stock buy backs, and issuing large dividends. If companies were actually legitimately concerned about the potential for a deflationary event they would be hoarding cash.
- jollyllama 3y ago
  >If companies were actually legitimately concerned about the potential for a deflationary event they would be hoarding cash. Or freezing salaries. Just like in the article. I don't really have an answer for you with regards to any stock buybacks or large dividends. I'm not talking about anything as reasonable or mentioning the 2nd derivative myself. M2 money supply is a specific thing that is responsible for money creation, it's going down now for the first time ever. We are in uncharted territory.