5 ms·

I mean I'll take my downvotes but it's not a controversy within the economics field that broad wage gains perpetuate inflation. It's also not just something "ta

• BoiledCabbage 3y ago
  > it's not a controversy within the economics field that broad wage gains perpetuate inflation Yes I agree that is what is commonly taught. A causes B. And it's true A (broad wage gains) can and do cause B (inflation). However it does not mean that B is usually caused by A. And that's the actual slight of hand that's happening here. To understand simply look at these two graphs. Monthly inflation since April of 2020 and us unemployment rate since then. https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/ https://www.statista.com/statistics/273418/unadjusted-monthl... Notice annual inflation (presented monthly) grew enormously beginning around June of 2020. Peaking at 9% plus in June of 2022. It is now steadily falling and down around 5% and likely will continue to fall. Now take a look at us unemployment during that same time. Unemployment shot up around the same time in 2020 (which should've caused significant disinflation according to the direct interpretation above which it didn't). It also has been consistent at around 3.5-3.6 percent for the past almost year+ and inflation has consistently fallen. https://data.bls.gov/timeseries/LNS14000000 https://data.bls.gov/timeseries/LNS14000000 Looking at it, there is essentially no correlation with our actual experienced inflation and our actual experienced unemployment rate. If anything at times it was negatively correlated (the opposite of what was above). Hence the reason I say, that it is the commonly spouted economic orthodoxy and it is what is taught and discussed, but you can see clearly it was not the cause of our recent inflation. Nor was it the cause of our 1970s inflation, and other instances of inflation. Frankly I'm shocked that economic orthodoxy hasn't caught up to this - and I'm starting to see some rumblings that following this episode in the 2020s it will. But if it does, the update will be motivated by popular culture / media discussion prompting it, which is extremely disappointing to see for any science field - regardless of whether it's a hard science or soft science. So in short - A implies B, does not mean that B implies A. And that's essentially what is being discussed here. We experienced tons of inflation and it wasn't driven by wage growth. Stomping out wage growth is not solving he underlying problem. Energy costs and fixing the supply side is what would (and will address the root cause). Energy has mostly fixed itself (from it's peak) and supply is much better but still having some issues.
  • boc 3y ago
    I think you’re confusing transitory inflation causes with entrenched inflation causes. I’m definitely not arguing that wages triggered our current bout of inflation. I’m arguing that wage increases are required to sustain and entrench inflation. If you have inflation continuing upwards without any wage reaction, eventually people can’t afford to consume, which curtails inflation (or you ruin your currency ala Turkey). The only way to sustain the rise long term is by increasing wages to match inflation expectations.
  • pandaman 3y ago
    Why do you compare with unemployment graph and not the wages if you want to prove that raising wages don't cause inflation? Not only the US had been paying additional unemployment benefits directly, there were also indirect money injections via PPP, student loan repayment moratorium, rent moratorium etc. Even now my mortgage bill comes with text along the lines of "if you are getting COVID assistance disregard this bill" so I imagine there are more of these programs and at least some of them are still in effect.