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Nominal wages are basically never lowered, but real wages can be easily lowered by giving out annual raises that are below inflation. Since 2020 the CPI is up m

Nominal wages are basically never lowered, but real wages can be easily lowered by giving out annual raises that are below inflation. Since 2020 the CPI is up more than 18%. [1] So if you're not earning more than 18% than you were then, you're receiving a lower real wage. This is one of the many reasons inflation is such a horrible system. It makes it really easy to invisibly abuse labor. People are trained not to spit on "gifts", but if you received a 2% raise each of the past 4 years, your real wages would now be down by nearly 10%. [1] - https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL

vkou 2y ago
That is a reason inflation sucks, but there are many reasons for why alternatives suck even more. Deflation strangles the economy, while basing your monetary supply off the amount of metal you dig out of the ground results in a tag-team of uncontrollable deflation and inflation taking turns. Unless you're planning on doing away with money entirely, it's the best of all possible worlds.
- logicchains 2y ago
  The American economy was more stable and grew at a higher rate in the 100 years before persistent inflation policies were adopted than in the 100 years after.
  - vkou 2y ago
    It hasn't been 100 years since it left the gold standard, and in the hundred years prior, the country was industrializing and electrifying and experiencing exponential population growth, and picking all the other low-hanging fruit of easy economic gains. But yes, if we focus on a single cherry-picked difference between two dramatically different time periods, we can spin any spherical-cow narrative we want.
gruez 2y ago
>but real wages can be easily lowered by giving out annual raises that are below inflation. Since 2020 the CPI is up more than 18%. [1] So if you're not earning more than 18% than you were then, you're receiving a lower real wage. If you looked around on the same st louis fed site, you'll see that real (ie. inflation adjusted) wages has not gone down. https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q
- somenameforme 2y ago
  Yeah real wages are the same as they were 4 years ago. At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. There's something just not quite right about these things. Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! Nobody would accept this (well unless they had a ton of money to dump into the markets), but with inflation and everybody thinking "wow I'm earning thousands more than last year - think of where I'll be in 20 years!", all of this is made invisible. [1] - https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
  - gruez 2y ago
    >At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. This comparison makes no sense. Wages describe a flow of money. Stock prices describe a lump sum amount of money. They're not comparable. >Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! This would basically always be the case unless you have runaway inflation. Any sort of investment is subject to compound interest. Even if labor and capital both grew at 10%, capital would outpace labor because it has compound returns. It might be tempting to add compound returns to labor as well, but that'd just be hyperinflation.
SoftTalker 2y ago
Inflation is a way to raise taxes without actually raising taxes. Gov't just creates more money. Gov't pays its bills, people's spending power declines, same as if they were taxed.
- chii 2y ago
  in order for inflation to be a tax, the tax brackets have to remain static so that your inflation wages grow without giving you any new purchasing power. Your taxes, however, gets bumped up to the new marginal rate, and thus the gov't raises more taxes silently. Inflation by itself cannot help raise more taxes, because the spending by gov'ts will equivalently increase due to inflation.
  - logicchains 2y ago
    Inflation is a tax because capital gains taxes aren't inflation adjusted. The higher inflation, the higher your nominal capital gains are, and you get taxed on nominal gains, not real gains.
  - somenameforme 2y ago
    Government spending itself drives inflation. When the government wants to raise money it sells treasuries that are largely purchased by organizations whose money was not in regular circulation. The most obvious example of this is the Federal Reserve who is (or was - they planned to reduce treasury holdings and I have not checked the latest numbers) the largest "private" holder of US treasuries. The government then takes this money and sends it into circulation, which increases inflation leading to a reduction in spending power of people. It's the same outcome as a tax increase (government has more, people have less), without the negative PR typically associated with raising taxes, particularly this sort of tax which tends to hurt low earners the most as their discretionary income is a far smaller percent of their total income than for high earners, and they also tend to have far less invested in inflation resistant vessels.

vkou 2y ago

That is a reason inflation sucks, but there are many reasons for why alternatives suck even more. Deflation strangles the economy, while basing your monetary supply off the amount of metal you dig out of the ground results in a tag-team of uncontrollable deflation and inflation taking turns. Unless you're planning on doing away with money entirely, it's the best of all possible worlds.

logicchains 2y ago
The American economy was more stable and grew at a higher rate in the 100 years before persistent inflation policies were adopted than in the 100 years after.
- vkou 2y ago
  It hasn't been 100 years since it left the gold standard, and in the hundred years prior, the country was industrializing and electrifying and experiencing exponential population growth, and picking all the other low-hanging fruit of easy economic gains. But yes, if we focus on a single cherry-picked difference between two dramatically different time periods, we can spin any spherical-cow narrative we want.

gruez 2y ago

>but real wages can be easily lowered by giving out annual raises that are below inflation. Since 2020 the CPI is up more than 18%. [1] So if you're not earning more than 18% than you were then, you're receiving a lower real wage. If you looked around on the same st louis fed site, you'll see that real (ie. inflation adjusted) wages has not gone down. https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q

somenameforme 2y ago
Yeah real wages are the same as they were 4 years ago. At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. There's something just not quite right about these things. Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! Nobody would accept this (well unless they had a ton of money to dump into the markets), but with inflation and everybody thinking "wow I'm earning thousands more than last year - think of where I'll be in 20 years!", all of this is made invisible. [1] - https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
- gruez 2y ago
  >At the same time real returns from the stock market are up 10%. [1] And this isn't an isolated event. Since 1979 (not cherrypicking, that's the first date of the FRED table you linked) real wages are up 10%, and real returns from the stock market are up 3200%. This comparison makes no sense. Wages describe a flow of money. Stock prices describe a lump sum amount of money. They're not comparable. >Imagine telling somebody in 1979 that, with the current system, in 50 years they'd be earning 10% more but the stock market would be up 3200% more! This would basically always be the case unless you have runaway inflation. Any sort of investment is subject to compound interest. Even if labor and capital both grew at 10%, capital would outpace labor because it has compound returns. It might be tempting to add compound returns to labor as well, but that'd just be hyperinflation.

SoftTalker 2y ago

Inflation is a way to raise taxes without actually raising taxes. Gov't just creates more money. Gov't pays its bills, people's spending power declines, same as if they were taxed.

chii 2y ago
in order for inflation to be a tax, the tax brackets have to remain static so that your inflation wages grow without giving you any new purchasing power. Your taxes, however, gets bumped up to the new marginal rate, and thus the gov't raises more taxes silently. Inflation by itself cannot help raise more taxes, because the spending by gov'ts will equivalently increase due to inflation.
- logicchains 2y ago
  Inflation is a tax because capital gains taxes aren't inflation adjusted. The higher inflation, the higher your nominal capital gains are, and you get taxed on nominal gains, not real gains.
- somenameforme 2y ago
  Government spending itself drives inflation. When the government wants to raise money it sells treasuries that are largely purchased by organizations whose money was not in regular circulation. The most obvious example of this is the Federal Reserve who is (or was - they planned to reduce treasury holdings and I have not checked the latest numbers) the largest "private" holder of US treasuries. The government then takes this money and sends it into circulation, which increases inflation leading to a reduction in spending power of people. It's the same outcome as a tax increase (government has more, people have less), without the negative PR typically associated with raising taxes, particularly this sort of tax which tends to hurt low earners the most as their discretionary income is a far smaller percent of their total income than for high earners, and they also tend to have far less invested in inflation resistant vessels.