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Yup. Few people talk about fair wage rebalancing as a driver of inflation, but it's inevitable if the bulk of wage growth goes disproportionately to low earners
by MontyCarloHall 3y ago
Yup. Few people talk about fair wage rebalancing as a driver of inflation, but it's inevitable if the bulk of wage growth goes disproportionately to low earners who produce widely consumed goods/services, whose prices were deflated due to low wages.
As an extreme example, suppose all farmers were unpaid slaves. Slavery gets outlawed, and farmers now get paid. Food prices rise dramatically, resulting in massive inflation overall (and thus a fall in real wages for everyone except farmers).
- jewayne 3y agoBut what if those prices weren't deflated at all by the low wages? What if instead of passing their low costs onto the consumer, businesses were just pocketing the difference instead, because prices weren't really based upon the costs to produce the good/service, but on the consumers' ability to pay. In other words, raising wages would have little to no affect on prices. I'm describing a non-competitive market, which of course also describes the majority of the American economy today.