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> Companies do not price goods based on the goodness of their hearts. Governments etc. argue that employees should not demand higher pay to match inflation to

> Companies do not price goods based on the goodness of their hearts. Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. If employers catch the absolute currency value increase of inflation the employee employer balance is shifting.

ajsnigrutin 3y ago
Governments can argue whatever they want, workers still demand more pay and (more often) change jobs to where they get paid more. The last years has been massive for worker movements, atleast here in my region.
- ChuckNorris89 3y ago
  It's difficult in Europe. Most companies aren't paying more, I've been interviewing for 3 months, so there's nowhere to go to for more money. If they can collectively jack up prices to bump the inflation, they can also collectively put a ceiling on wages.
nabla9 3y ago
>Governments etc. argue As they should. that's how it works and they are correct. Employees should argue against that and demand more if they dare. The job of Central bank is to increase interest rates until unemployment rate increases to the level where employees don't dare ask more. Unemployment reduces both demand and wage growth. That will slow down inflation but it also baits recession. Economy is a dynamic system with feedback loops.
- ClumsyPilot 3y ago
  > Central bank is to increase interest rates until unemployment rate increases I might be old fashioned, but last time I checked, government's job was not to drive down living standards. Maybe their job is to ensure that a resource-show like rising energy prices does not hit, by majing economy rsillient and relying on diverse suppliers
  - redeeman 3y ago
    > I might be old fashioned, but last time I checked, government's job was not to drive down living standards. thats because you have been reading the government marketing materials instead of looking at what they do
  - dghlsakjg 3y ago
    They didn't say government. They said Central Banks, which in most places are semi-disconnected from elected government since you don't really want anyone playing politics with Central Bank policy. Central Banks are generally tasked with setting one single, but very powerful, variable: interest rates. There's thought to be a pretty strong causal relationship between interest rates and unemployment. The central bank absolutely knows that jacking up interest rates will, in the short term, drive down living standards. The trade-off is that it will also drive down inflation, which causes much bigger drops in living standards in the long term. ... Or so the theory goes.
    - revelio 3y ago
      In practice central bankers are unelected politicians. Their mandates are set by politicians, they aren't actually bankers in the normal sense of the term, and what they do is attempt to plan the economy in service of politically set goals. If central bankers were really independent of politics then they would of course have refused to print any money to fund COVID measures like lockdowns on the grounds that they are responsible solely for inflation and employment, so if governments wanted to do that they'd have to pass emergency taxes. Obviously no central banker said that. They were all immediately on board with letting politicians do whatever they wanted.
      - nabla9 3y ago
        > Their mandates are set by politicians. You say as it's a bad thing. The mandate is public and set by politicians selected by people. This "it's all bad" because politics stuff is jut nihilism.
        3y ago
- bumby 3y ago
  I think the OP was referring to how governments tend to be conciliatory to actors just responding to market forces in one side of the debate and not the other. Jon Stewart had a good interview with Larry Summers on this (although I realize he’s no longer in the government). Stewart’s point was that the govt/central bank tends to make excuses for letting corporations benefit from “market forces” but do more to actively thwart workers for using those same forces to their own benefit.
- JumpCrisscross 3y ago
  > job of Central bank is to increase interest rates until unemployment rate increases This is incorrect. The job of the Fed is to maximise price stability (which it defines as 2% inflation) and minimise unemployment (which it defines as the natural unemployment rate, to which we are close). There has basically never been a time when the Fed wanted unemployment to go up. (Keep in mind: unemployment != wage increases, though the two are related as are prices.)
kortilla 3y ago
Governments argue both, that’s what this article shows. They can shout from the hilltops to “stop asking for more everyone!”, but it’s not going to help without actual action to force it.
- runarberg 3y ago
  This may be the case, however somehow it seems it is usually wages which stagnate while profits skyrocket. Either the government is unable or unwilling to enforce this equally. If unable, they are incompetent, if unwilling, than they are corrupt. In either case we live in a corporatocracy not democracy.
evancox100 3y ago
What government is arguing that employee wages should be lower/stagnant in order to fight inflation? EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get? Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", not a lot of "Please turn down your pay increase so we can fight inflation." The reason no one would actually say the second is it is a ridiculous collective action problem that is obviously unsolvable on the employee side. The Australia governor warned against a 5.75% pay raise for govt employees (I think), but he was addressing the employer in that case, not individual workers.
- taude 3y ago
  Probably referring to news like this? https://www.nytimes.com/2023/04/28/business/wage-inflation-march.html https://www.nytimes.com/2023/04/28/business/wage-inflation-m...
  - deleted 3y ago
    [deleted]
  - evancox100 3y ago
    Can't read the full article but the headline seems to say that the fed is hoping for wage increases to slow, but that would be because they have tightened monetary policy. That's different from the fed chair getting up and saying "Workers, please ask your boss to pay you less so we can fight inflation." Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out of work, to the extent of provoking a recession if need be. So yes the fed is looking for some pain in the labor market to see that things are working, though they would love for inflation to come down without a recession too. But high inflation is also bad for workers, because wages in general don't keep up in real terms (re-negotiated infrequently, leverage imbalance between company and worker, status quo bias, etc.). The higher inflation is the larger you can expect companies profit shares to be (case in point, the original article). Also really high inflation seems bad in general for the economy, both workers and companies.
legitster 3y ago
> Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Source?
- HumblyTossed 3y ago
  Isnt this what Powell keeps saying?
  - mattgreenrocks 3y ago
    Yes, he’s been whining about this since late last year.
- lovich 3y ago
  > While Bank of England Governor Andrew Bailey sparked a minor firestorm when he suggested workers shouldn’t ask for big wage increases…[1] [1] https://www.bloomberg.com/news/articles/2022-03-17/powell-treads-tricky-path-in-saying-wages-are-rising-too-fast#xj4y7vzkg https://www.bloomberg.com/news/articles/2022-03-17/powell-tr...
  - legitster 3y ago
    He's diagnosing runaway inflation. At no point is actually chastising workers directly. Bailey's comments were squarely aimed at blaming Brexit and energy markets, people intentionally took his words out of context to bake up a "gaff".
    - lovich 3y ago
      >… when he suggested workers shouldn’t ask for big wage increases… How is that not directly telling workers to not ask for wage increases? I’d also say adding the word “chastising” is changing the tone of what the original commentor and I were referencing when talking about governments asking workers to not ask for wage increases.
      - 3y ago
roenxi 3y ago
Governments have a cynical knack of identifying every possible cause of inflation, no matter how tenuous, except the obvious one - government policy. Governments will blame businesses, consumers, employees, foreigners and bad weather. The only option ruled out is all the money printing going on and a good decade of regulators encouraging that and high-risk financial behaviour. If inflation is high, it is a bad time to listen to governments.
- redeeman 3y ago
  > If inflation is high, it is a bad time to listen to governments. Why complicate matters? I suggest we change it into: "It is bad to listen to governments"
- sofixa 3y ago
  If anyone is still claiming the main or only reason for inflation is "money printing", they really haven't being paying attention to the world for the past 3 years and it's a terrible idea to listen to them. Why are you ignoring a pandemic with associated measures such as lockdowns (although funnily, Sweden is very useful - they didn't lock down, they didn't print a ton of money, yet they're experiencing similar inflation to their neighbours), war in continental Europe, and the impact those had on global markets (higher costs of critical raw materials such as oil and gas, various metals, disrupted supply chains and bottlenecks, etc.)? Do you really think none of this matters, or do your political leanings tell you it's always the government's fault?
  - revelio 3y ago
    He labelled the cause as government policy, which clearly includes pandemic measures. Sweden didn't lock down but they did print a ton of money. Compare money supply growth for UK vs Sweden. It's the same and occurred at the same time. Lockdowns weren't the only pandemic spending measures unfortunately. All governments everywhere massively pumped the money supply to pay for "whatever it takes" and now the bill has come due: https://d3fy651gv2fhd3.cloudfront.net/charts/sweden-money-supply-m3@3x.png?s=swedenmonsupm3&v=202306031006V20230410&d1=20130629&url2=/united-kingdom/money-supply-m3 https://d3fy651gv2fhd3.cloudfront.net/charts/sweden-money-su... > Do you really think none of this matters, or do your political leanings tell you it's always the government's fault? Inflation is always and everywhere a monetary phenomenon, however, this basic insight is easy to get confused about because there's a large gap between theory and practice when it comes to this metric. In theory inflation cannot occur without money printing, because a rise in prices of something like oil or food must be compensated by a fall in prices elsewhere as demand for that less essential thing disappears. People re-allocate their financial decisions towards the thing increasing in prices, businesses compensate by lowering prices to try and increase demand, it balances out. Several things complicate this simple picture in practice. One is that government inflation metrics don't include all prices. Indeed they cannot because it's too difficult to collect that data and prices constantly change. Also, governments like to play games with inflation statistics because if you can confuse people about inflation you get to pay for election pledges with money printing and then blame inflation on external factors, and because people tend to vote for whoever promises to spend more without raising taxes it's a quick way to hack democracy. So they usually define inflation only in terms of a small subset of all prices. If you do that then you can obviously have inflation even in the absence of money printing because you're ignoring the prices that fall. Another problem is that in a sufficiently damaging period of price instability, some goods and services may simply cease being available. Everyone is spending all their money on heating their homes and other businesses go bankrupt as a consequence. At this point the price of the thing effectively goes to infinity, it just can't be obtained at any price, but that ruins the calculations and so governments do substitutions within the basket of prices, asserting that X is a substitute for Y even if in reality X is quite different (e.g. different kinds of meat). There are lots of hacks like these in how the stats are calculated. Yet another problem is that money printing is somewhat circular in a fractional reserve system with very low reserve ratios and there are lots of feedback loops. If the government prints lots of money, then gives it to people whilst simultaneously banning the spending of it then it will appear they printed lots of money without causing inflation. When they stop banning the spending of it, that will show up as inflation even if the money printing has stopped. This is what's happening now, as governments shovelled money into people's pockets during lockdowns but there was nothing open to spend it on. Nonetheless, we usually think of inflation has being caused by money printing because most of the time prices aren't being affected by wars or oil cartels and when that does occur, the prices which rise are being compensated by other prices that are falling or disappearing (which is a loss of wealth). It may just not be obvious.
IMTDb 3y ago
> Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Meanwhile, my government mandates that ALL employees automatically get a raise matching inflation. No negotiation possible/needed; employers cannot refuse. Belgium. Sounds great in theory; in practice Belgium competitiveness index and innovation index is lower than all its neighbouring countries; including France and post Brexit UK.
- pnt12 3y ago
  But does it result in better quality of life? Maybe competitiveness is not the best target to optimize for.
  - ETH_start 3y ago
    Broadly speaking, competitiveness is the source of quality of life improvements, through its effect of expanding capital and thereby raising productivity.
    - dpc050505 3y ago
      that's a cute hypothesis where's the proof
      - cool_dude85 3y ago
        Well, you see, A = A, and from there the rest follows.
      - kriops 3y ago
        Your comment, for one. What device did you use to make it?
        DropInIn 3y ago
        And they could afford to own that device readily while almost certainly believing in one of the more regulated nations in the world, right? How are the citizens in the least regulated doing on that front? Yea....
LatteLazy 3y ago
>Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Anyone stupid enough to listen deserves all they get...

ajsnigrutin 3y ago

Governments can argue whatever they want, workers still demand more pay and (more often) change jobs to where they get paid more. The last years has been massive for worker movements, atleast here in my region.

ChuckNorris89 3y ago
It's difficult in Europe. Most companies aren't paying more, I've been interviewing for 3 months, so there's nowhere to go to for more money. If they can collectively jack up prices to bump the inflation, they can also collectively put a ceiling on wages.

nabla9 3y ago

>Governments etc. argue As they should. that's how it works and they are correct. Employees should argue against that and demand more if they dare. The job of Central bank is to increase interest rates until unemployment rate increases to the level where employees don't dare ask more. Unemployment reduces both demand and wage growth. That will slow down inflation but it also baits recession. Economy is a dynamic system with feedback loops.

ClumsyPilot 3y ago
> Central bank is to increase interest rates until unemployment rate increases I might be old fashioned, but last time I checked, government's job was not to drive down living standards. Maybe their job is to ensure that a resource-show like rising energy prices does not hit, by majing economy rsillient and relying on diverse suppliers
- redeeman 3y ago
  > I might be old fashioned, but last time I checked, government's job was not to drive down living standards. thats because you have been reading the government marketing materials instead of looking at what they do
- dghlsakjg 3y ago
  They didn't say government. They said Central Banks, which in most places are semi-disconnected from elected government since you don't really want anyone playing politics with Central Bank policy. Central Banks are generally tasked with setting one single, but very powerful, variable: interest rates. There's thought to be a pretty strong causal relationship between interest rates and unemployment. The central bank absolutely knows that jacking up interest rates will, in the short term, drive down living standards. The trade-off is that it will also drive down inflation, which causes much bigger drops in living standards in the long term. ... Or so the theory goes.
  - revelio 3y ago
    In practice central bankers are unelected politicians. Their mandates are set by politicians, they aren't actually bankers in the normal sense of the term, and what they do is attempt to plan the economy in service of politically set goals. If central bankers were really independent of politics then they would of course have refused to print any money to fund COVID measures like lockdowns on the grounds that they are responsible solely for inflation and employment, so if governments wanted to do that they'd have to pass emergency taxes. Obviously no central banker said that. They were all immediately on board with letting politicians do whatever they wanted.
    - nabla9 3y ago
      > Their mandates are set by politicians. You say as it's a bad thing. The mandate is public and set by politicians selected by people. This "it's all bad" because politics stuff is jut nihilism.
      - 3y ago
bumby 3y ago
I think the OP was referring to how governments tend to be conciliatory to actors just responding to market forces in one side of the debate and not the other. Jon Stewart had a good interview with Larry Summers on this (although I realize he’s no longer in the government). Stewart’s point was that the govt/central bank tends to make excuses for letting corporations benefit from “market forces” but do more to actively thwart workers for using those same forces to their own benefit.
JumpCrisscross 3y ago
> job of Central bank is to increase interest rates until unemployment rate increases This is incorrect. The job of the Fed is to maximise price stability (which it defines as 2% inflation) and minimise unemployment (which it defines as the natural unemployment rate, to which we are close). There has basically never been a time when the Fed wanted unemployment to go up. (Keep in mind: unemployment != wage increases, though the two are related as are prices.)

kortilla 3y ago

Governments argue both, that’s what this article shows. They can shout from the hilltops to “stop asking for more everyone!”, but it’s not going to help without actual action to force it.

runarberg 3y ago
This may be the case, however somehow it seems it is usually wages which stagnate while profits skyrocket. Either the government is unable or unwilling to enforce this equally. If unable, they are incompetent, if unwilling, than they are corrupt. In either case we live in a corporatocracy not democracy.

evancox100 3y ago

What government is arguing that employee wages should be lower/stagnant in order to fight inflation? EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get? Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", not a lot of "Please turn down your pay increase so we can fight inflation." The reason no one would actually say the second is it is a ridiculous collective action problem that is obviously unsolvable on the employee side. The Australia governor warned against a 5.75% pay raise for govt employees (I think), but he was addressing the employer in that case, not individual workers.

taude 3y ago
Probably referring to news like this? https://www.nytimes.com/2023/04/28/business/wage-inflation-march.html https://www.nytimes.com/2023/04/28/business/wage-inflation-m...
- deleted 3y ago
  [deleted]
- evancox100 3y ago
  Can't read the full article but the headline seems to say that the fed is hoping for wage increases to slow, but that would be because they have tightened monetary policy. That's different from the fed chair getting up and saying "Workers, please ask your boss to pay you less so we can fight inflation." Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out of work, to the extent of provoking a recession if need be. So yes the fed is looking for some pain in the labor market to see that things are working, though they would love for inflation to come down without a recession too. But high inflation is also bad for workers, because wages in general don't keep up in real terms (re-negotiated infrequently, leverage imbalance between company and worker, status quo bias, etc.). The higher inflation is the larger you can expect companies profit shares to be (case in point, the original article). Also really high inflation seems bad in general for the economy, both workers and companies.

legitster 3y ago

> Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Source?

HumblyTossed 3y ago
Isnt this what Powell keeps saying?
- mattgreenrocks 3y ago
  Yes, he’s been whining about this since late last year.
lovich 3y ago
> While Bank of England Governor Andrew Bailey sparked a minor firestorm when he suggested workers shouldn’t ask for big wage increases…[1] [1] https://www.bloomberg.com/news/articles/2022-03-17/powell-treads-tricky-path-in-saying-wages-are-rising-too-fast#xj4y7vzkg https://www.bloomberg.com/news/articles/2022-03-17/powell-tr...
- legitster 3y ago
  He's diagnosing runaway inflation. At no point is actually chastising workers directly. Bailey's comments were squarely aimed at blaming Brexit and energy markets, people intentionally took his words out of context to bake up a "gaff".
  - lovich 3y ago
    >… when he suggested workers shouldn’t ask for big wage increases… How is that not directly telling workers to not ask for wage increases? I’d also say adding the word “chastising” is changing the tone of what the original commentor and I were referencing when talking about governments asking workers to not ask for wage increases.
    - 3y ago

roenxi 3y ago

Governments have a cynical knack of identifying every possible cause of inflation, no matter how tenuous, except the obvious one - government policy. Governments will blame businesses, consumers, employees, foreigners and bad weather. The only option ruled out is all the money printing going on and a good decade of regulators encouraging that and high-risk financial behaviour. If inflation is high, it is a bad time to listen to governments.

redeeman 3y ago
> If inflation is high, it is a bad time to listen to governments. Why complicate matters? I suggest we change it into: "It is bad to listen to governments"
sofixa 3y ago
If anyone is still claiming the main or only reason for inflation is "money printing", they really haven't being paying attention to the world for the past 3 years and it's a terrible idea to listen to them. Why are you ignoring a pandemic with associated measures such as lockdowns (although funnily, Sweden is very useful - they didn't lock down, they didn't print a ton of money, yet they're experiencing similar inflation to their neighbours), war in continental Europe, and the impact those had on global markets (higher costs of critical raw materials such as oil and gas, various metals, disrupted supply chains and bottlenecks, etc.)? Do you really think none of this matters, or do your political leanings tell you it's always the government's fault?
- revelio 3y ago
  He labelled the cause as government policy, which clearly includes pandemic measures. Sweden didn't lock down but they did print a ton of money. Compare money supply growth for UK vs Sweden. It's the same and occurred at the same time. Lockdowns weren't the only pandemic spending measures unfortunately. All governments everywhere massively pumped the money supply to pay for "whatever it takes" and now the bill has come due: https://d3fy651gv2fhd3.cloudfront.net/charts/sweden-money-supply-m3@3x.png?s=swedenmonsupm3&v=202306031006V20230410&d1=20130629&url2=/united-kingdom/money-supply-m3 https://d3fy651gv2fhd3.cloudfront.net/charts/sweden-money-su... > Do you really think none of this matters, or do your political leanings tell you it's always the government's fault? Inflation is always and everywhere a monetary phenomenon, however, this basic insight is easy to get confused about because there's a large gap between theory and practice when it comes to this metric. In theory inflation cannot occur without money printing, because a rise in prices of something like oil or food must be compensated by a fall in prices elsewhere as demand for that less essential thing disappears. People re-allocate their financial decisions towards the thing increasing in prices, businesses compensate by lowering prices to try and increase demand, it balances out. Several things complicate this simple picture in practice. One is that government inflation metrics don't include all prices. Indeed they cannot because it's too difficult to collect that data and prices constantly change. Also, governments like to play games with inflation statistics because if you can confuse people about inflation you get to pay for election pledges with money printing and then blame inflation on external factors, and because people tend to vote for whoever promises to spend more without raising taxes it's a quick way to hack democracy. So they usually define inflation only in terms of a small subset of all prices. If you do that then you can obviously have inflation even in the absence of money printing because you're ignoring the prices that fall. Another problem is that in a sufficiently damaging period of price instability, some goods and services may simply cease being available. Everyone is spending all their money on heating their homes and other businesses go bankrupt as a consequence. At this point the price of the thing effectively goes to infinity, it just can't be obtained at any price, but that ruins the calculations and so governments do substitutions within the basket of prices, asserting that X is a substitute for Y even if in reality X is quite different (e.g. different kinds of meat). There are lots of hacks like these in how the stats are calculated. Yet another problem is that money printing is somewhat circular in a fractional reserve system with very low reserve ratios and there are lots of feedback loops. If the government prints lots of money, then gives it to people whilst simultaneously banning the spending of it then it will appear they printed lots of money without causing inflation. When they stop banning the spending of it, that will show up as inflation even if the money printing has stopped. This is what's happening now, as governments shovelled money into people's pockets during lockdowns but there was nothing open to spend it on. Nonetheless, we usually think of inflation has being caused by money printing because most of the time prices aren't being affected by wars or oil cartels and when that does occur, the prices which rise are being compensated by other prices that are falling or disappearing (which is a loss of wealth). It may just not be obvious.

IMTDb 3y ago

> Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Meanwhile, my government mandates that ALL employees automatically get a raise matching inflation. No negotiation possible/needed; employers cannot refuse. Belgium. Sounds great in theory; in practice Belgium competitiveness index and innovation index is lower than all its neighbouring countries; including France and post Brexit UK.

pnt12 3y ago
But does it result in better quality of life? Maybe competitiveness is not the best target to optimize for.
- ETH_start 3y ago
  Broadly speaking, competitiveness is the source of quality of life improvements, through its effect of expanding capital and thereby raising productivity.
  - dpc050505 3y ago
    that's a cute hypothesis where's the proof
    - cool_dude85 3y ago
      Well, you see, A = A, and from there the rest follows.
    - kriops 3y ago
      Your comment, for one. What device did you use to make it?
      - DropInIn 3y ago
        And they could afford to own that device readily while almost certainly believing in one of the more regulated nations in the world, right? How are the citizens in the least regulated doing on that front? Yea....

LatteLazy 3y ago

>Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Anyone stupid enough to listen deserves all they get...