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Wouldn't linking salaries to inflation be a feedback loop? Inflation is driven by various factors, but if for example like in 2020 the government of the biggest

Wouldn't linking salaries to inflation be a feedback loop? Inflation is driven by various factors, but if for example like in 2020 the government of the biggest economy in the world decided to print billions of dollars to have "more money", something is gonna have to give. And in practice that something was everyone's money is now worth less.

bryanlarsen 2y ago
Yes, it's a feedback loop, but it's a highly damped feedback loop.
carlosjobim 2y ago
No, it is a myth that inflation is caused by higher salaries. As you know, salaries are the last thing to increase with inflation. It's not boats that make the tide rise.
- f1shy 2y ago
  Yes and no. Inflation is very directly coupled with emission, not salaries. BUT if you have base inflation due to emission, and then do autoindexing, the win of the emission ist totaly lost. Is the primary source of hyperinflation.
  - haccount 2y ago
    So the right way is to use emission but make sure peoples wages don't increase competitive with inflation. Making marginal people poor and padding the pockets of people who have better options for fighting for higher wages? I'm in the later category so I wouldn't suffer but the entire concept sounds a bit evil tbh and an encouragement for inflation because corporations will get away paying their low ranking slaves less.
    - f1shy 2y ago
      Of course is absolutely evil! Look any 3rd world country. The whole idea of inflation via emission is to dissolve people money: at the time of emission local money is say X for a dollar, the gov. uses the money at that value, pays salaries, etc, but at the time the people actually uses the money, it is X*2 for a dollar. That is the whole game. Horrible, yes, but the daily reality for most people in 3rd World countries.
- nradov 2y ago
  It's not a myth. Look at the repeated economic disasters in Argentina.
  - carlosjobim 2y ago
    Inflation is real, hyper inflation is also real, such as in your example Argentina. But it is not caused by higher salaries.
    - nradov 2y ago
      Higher salaries are both a cause of and result of inflation. Hence the positive feedback loop.
      - kelseyfrog 2y ago
        The strength of the statement is decoupled from its veracity.
f1shy 2y ago
It was tried multiple times in 3rd world countries with the expected consequences: total disaster and hyperinflation.
- CorrectHorseBat 2y ago
  Belgium has automatically indexed salaries and we don't have hyperinflation. Inequality is among the lowest in the world.
  - f1shy 2y ago
    Interesting. Do you have a source? Is there a law? I cannot find anything about automatic indexation of salaries with inflation... I've seen some indexation with consumer price index, but is not with inflation. Maybe you are conflating the 2 concepts?
    - CorrectHorseBat 2y ago
      Consumer price index is just a measure for inflation, no? So what's the big difference?
      - f1shy 2y ago
        Absolutely no. The whole methodology is different. The update rate could be substantially different, also “consumer price idx” is typically reduced to very basic elemental goods and services, which are often regulated, and don’t change at the same rate as a live indicator as inflation. I lived in a country with CPI of 5% and the inflation was 25% same month. Not even close!
        CorrectHorseBat 2y ago
        And how is _the_ inflation then calculated?
        2y ago
Spooky23 2y ago
Not really. Most of the grousing and dire prophecy about minimum wage is bunk. The most conservative folks are resource extraction industry folks, and they are against anything, wages, tax, regulation, etc that reduces their margin. Don’t listen to them unless you’re in their business. With respect to 2020, there’s a weighing of evils. You either increase the monetary supply and trigger moderate inflation, or allow a deflationary death spiral. The economy halted — gasoline prices went negative regionally for a bit.
naming_the_user 2y ago
I mean it has to by definition. If you hire someone to do a basic job like say sweeping your drive or cleaning or whatever and the cleaner used to cost 15/h and now costs 17/h that's directly linked, 100% of the minimum wage increase goes straight into price increases. You can argue about what percentage feeds through to various products - not everything is fully linked to local labour costs - but I don't see how anyone can pretend otherwise, it's about as close to mathematically defined as you can get.
Kartak1 2y ago
In Belgium, we have an indexed salary system, partly linked to inflation and other factors. It's a complex system, conditioned by many variables (like just about everything else in this country renowned for its Belgian-style compromises). It is also frozen for some years, especially when the financial lobby succeeds in manipulating politicians. It's a constant battle, highly classified by category, called Commission paritaire (CP). For example, for the coming year, the CP200 will obtain an indexation of all salaries of 3.6%, which doesn't mean you can't ask for a pay rise, although some employees take advantage of the vagueness created to put their employees on the fixed scale (and fabricate nonsense in their employment contracts, indexation is not an increase). It should also be noted that when you change jobs, you can both pass on your experience in the same CP, but if you change jobs (unless you negotiate hard), you fall back to zero experience (or the experience you already have in that CP). It's almost become a survival mechanism for the lower and low-middle classes of the population. It's a system that the right-wing parties, currently in the majority in this country, are keen to reform, and it's not going down well (which explains, in part, why we can't seem to form governments quickly). They're using every trick in the book to discourage the people from giving up the advantages painstakingly acquired through centuries of unfortunate industrialization, which have benefited from including external countries. The index system will soon be celebrating its 105th anniversary. It's a vector of social peace and proof that, when properly implemented, it has no effect on hyperinflation: https://www.cgslb.be/sites/default/files/aclvb/Documenten/Artikels/2019/index-10-points-cles.pdf https://www.cgslb.be/sites/default/files/aclvb/Documenten/Ar...

bryanlarsen 2y ago

Yes, it's a feedback loop, but it's a highly damped feedback loop.

carlosjobim 2y ago

No, it is a myth that inflation is caused by higher salaries. As you know, salaries are the last thing to increase with inflation. It's not boats that make the tide rise.

f1shy 2y ago
Yes and no. Inflation is very directly coupled with emission, not salaries. BUT if you have base inflation due to emission, and then do autoindexing, the win of the emission ist totaly lost. Is the primary source of hyperinflation.
- haccount 2y ago
  So the right way is to use emission but make sure peoples wages don't increase competitive with inflation. Making marginal people poor and padding the pockets of people who have better options for fighting for higher wages? I'm in the later category so I wouldn't suffer but the entire concept sounds a bit evil tbh and an encouragement for inflation because corporations will get away paying their low ranking slaves less.
  - f1shy 2y ago
    Of course is absolutely evil! Look any 3rd world country. The whole idea of inflation via emission is to dissolve people money: at the time of emission local money is say X for a dollar, the gov. uses the money at that value, pays salaries, etc, but at the time the people actually uses the money, it is X*2 for a dollar. That is the whole game. Horrible, yes, but the daily reality for most people in 3rd World countries.
nradov 2y ago
It's not a myth. Look at the repeated economic disasters in Argentina.
- carlosjobim 2y ago
  Inflation is real, hyper inflation is also real, such as in your example Argentina. But it is not caused by higher salaries.
  - nradov 2y ago
    Higher salaries are both a cause of and result of inflation. Hence the positive feedback loop.
    - kelseyfrog 2y ago
      The strength of the statement is decoupled from its veracity.

f1shy 2y ago

It was tried multiple times in 3rd world countries with the expected consequences: total disaster and hyperinflation.

CorrectHorseBat 2y ago
Belgium has automatically indexed salaries and we don't have hyperinflation. Inequality is among the lowest in the world.
- f1shy 2y ago
  Interesting. Do you have a source? Is there a law? I cannot find anything about automatic indexation of salaries with inflation... I've seen some indexation with consumer price index, but is not with inflation. Maybe you are conflating the 2 concepts?
  - CorrectHorseBat 2y ago
    Consumer price index is just a measure for inflation, no? So what's the big difference?
    - f1shy 2y ago
      Absolutely no. The whole methodology is different. The update rate could be substantially different, also “consumer price idx” is typically reduced to very basic elemental goods and services, which are often regulated, and don’t change at the same rate as a live indicator as inflation. I lived in a country with CPI of 5% and the inflation was 25% same month. Not even close!
      - CorrectHorseBat 2y ago
        And how is _the_ inflation then calculated?
        2y ago

Spooky23 2y ago

Not really. Most of the grousing and dire prophecy about minimum wage is bunk. The most conservative folks are resource extraction industry folks, and they are against anything, wages, tax, regulation, etc that reduces their margin. Don’t listen to them unless you’re in their business. With respect to 2020, there’s a weighing of evils. You either increase the monetary supply and trigger moderate inflation, or allow a deflationary death spiral. The economy halted — gasoline prices went negative regionally for a bit.

naming_the_user 2y ago

I mean it has to by definition. If you hire someone to do a basic job like say sweeping your drive or cleaning or whatever and the cleaner used to cost 15/h and now costs 17/h that's directly linked, 100% of the minimum wage increase goes straight into price increases. You can argue about what percentage feeds through to various products - not everything is fully linked to local labour costs - but I don't see how anyone can pretend otherwise, it's about as close to mathematically defined as you can get.

Kartak1 2y ago

In Belgium, we have an indexed salary system, partly linked to inflation and other factors. It's a complex system, conditioned by many variables (like just about everything else in this country renowned for its Belgian-style compromises). It is also frozen for some years, especially when the financial lobby succeeds in manipulating politicians. It's a constant battle, highly classified by category, called Commission paritaire (CP). For example, for the coming year, the CP200 will obtain an indexation of all salaries of 3.6%, which doesn't mean you can't ask for a pay rise, although some employees take advantage of the vagueness created to put their employees on the fixed scale (and fabricate nonsense in their employment contracts, indexation is not an increase). It should also be noted that when you change jobs, you can both pass on your experience in the same CP, but if you change jobs (unless you negotiate hard), you fall back to zero experience (or the experience you already have in that CP). It's almost become a survival mechanism for the lower and low-middle classes of the population. It's a system that the right-wing parties, currently in the majority in this country, are keen to reform, and it's not going down well (which explains, in part, why we can't seem to form governments quickly). They're using every trick in the book to discourage the people from giving up the advantages painstakingly acquired through centuries of unfortunate industrialization, which have benefited from including external countries. The index system will soon be celebrating its 105th anniversary. It's a vector of social peace and proof that, when properly implemented, it has no effect on hyperinflation: https://www.cgslb.be/sites/default/files/aclvb/Documenten/Artikels/2019/index-10-points-cles.pdf https://www.cgslb.be/sites/default/files/aclvb/Documenten/Ar...