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Salaries don't rise along with inflation, it's one of the reasons why inflation is being propounded by the Fed. If the inflation rate is 3%, you give all your

Salaries don't rise along with inflation, it's one of the reasons why inflation is being propounded by the Fed. If the inflation rate is 3%, you give all your employees a 2% raise at the end of the year. You've given them a 2% raise but have effectively cut their salary. Of course unions were wise to this in the 1970s, one of the reasons there was such massive inflation then, because wages were keeping up with inflation to some extent. But this is not the 1970s, private company unionization rates are only 6.6%, so wages can be cut in this way in a manner unorganized workers will feel more psychologicially at ease with, since technically they're getting a raise when their salary is cut.

greenyoda 13y ago
If salaries don't rise with inflation, then two things will happen: 1. Workers will have less disposable income to spend, so economic growth will slow down. 2. Workers will be more likely to leave their jobs if offered a salary that's just a few percent higher. The companies that are having problems finding and retaining workers now will have even more problems if the total worth of the compensation package they're offering (in real dollars) goes down. You don't need to be a unionized worker to notice that your salary can buy less and less stuff every year.
- firstOrder 13y ago
  > Workers will have less disposable income to spend, so economic growth will slow down. Yes, Karl Marx noted this a century and a half ago. > Workers will be more likely to leave their jobs if offered a salary that's just a few percent higher The current unemployment rate is 7.2%. From 1987 to 2007, there was a 14 month period circa 1992 where unemployment was 7.2% or higher, otherwise, it was always lower. Unemployment is at historic highs, not really a time when companies have to raise their salaries to attract workers. Also, industrial capacity is at historic lows ( http://monthlyreview.org/2008/12/01/financial-implosion-and-stagnation http://monthlyreview.org/2008/12/01/financial-implosion-and-... ). Just think of the anecdotal discussion on HN and elsewhere about the VC crunch. Capital is sitting on the sidelines - just look at the industrial utility chart. Companies aren't using the capacity they have, never mind new investment.

greenyoda 13y ago

If salaries don't rise with inflation, then two things will happen: 1. Workers will have less disposable income to spend, so economic growth will slow down. 2. Workers will be more likely to leave their jobs if offered a salary that's just a few percent higher. The companies that are having problems finding and retaining workers now will have even more problems if the total worth of the compensation package they're offering (in real dollars) goes down. You don't need to be a unionized worker to notice that your salary can buy less and less stuff every year.

firstOrder 13y ago
> Workers will have less disposable income to spend, so economic growth will slow down. Yes, Karl Marx noted this a century and a half ago. > Workers will be more likely to leave their jobs if offered a salary that's just a few percent higher The current unemployment rate is 7.2%. From 1987 to 2007, there was a 14 month period circa 1992 where unemployment was 7.2% or higher, otherwise, it was always lower. Unemployment is at historic highs, not really a time when companies have to raise their salaries to attract workers. Also, industrial capacity is at historic lows ( http://monthlyreview.org/2008/12/01/financial-implosion-and-stagnation http://monthlyreview.org/2008/12/01/financial-implosion-and-... ). Just think of the anecdotal discussion on HN and elsewhere about the VC crunch. Capital is sitting on the sidelines - just look at the industrial utility chart. Companies aren't using the capacity they have, never mind new investment.