MotoSlashSix t1_jae9ow7 wrote
Reply to comment by macgyversstuntdouble in Baltimore, the problem isn't a lack of jobs: "We can’t find people to work" - The newest threat to Biden's climate policies. by roccoccoSafredi
>yet your first link literally describes it as a valid condition.
Being a "valid condition" and claiming those wage increases are the primary driver of a price increase "spiral" is not the same thing. So claiming that increasing wages will cause price increase spirals is nonsense.
​
>Given the paths of prices and pay in the past year, I believe these concerns are probably overblown. And one reason is simple math. Labor isn’t the only input into most goods and services. When the cost of labor increases, the costs of the other inputs don’t necessarily change. So the overall cost of producing a good or service doesn’t increase as much as the cost of labor alone.
Or to put it another way, this is part of what your analysis left out:
​
>Worrying about wage‐to‐price passthrough after a period of excessively expansionary policy is therefore akin to lamenting gravity as the cause of hurtling to the ground after someone has thrown you from a plane. Encouraged by politicians such as Johnson, the wage‐spiral concept encourages businesses and workers to blame each other, mistaking the consequences of inflation for its origins.
macgyversstuntdouble t1_jaeezpn wrote
> When the cost of labor increases, the costs of the other inputs don’t necessarily change. So the overall cost of producing a good or service doesn’t increase as much as the cost of labor alone.
So everyone can get an 8% raise this year, and the people who own those companies will also get their 8% increase in profits too (aka their wages). And that won't increase inflation! Brilliant! /s
You see - this is what broad increases in wages do. They increase the cost of doing business. The Fed is trying to curb that by cooling the economy, but we've got a shit-ton of economic momentum going forward and it's hard to stop a train that Congress shoves a trillion dollars in new spending every year.
If you think that wages are not correlated to prices, you are dumb. I think you understand that there is a wage price correlation (as all your papers state), but you instead contend that there is instead something bigger driving inflation. That may be true - but wages are sticky.
Your boss doesn't tell you "Prices have come down on goods, so you get a 6% decrease in wages". However, we expect "prices are up 8%, here's your 8% increase in wages". One of these is sticky, and it's why many are pushing for wages to lag more. It sucks, but it's real.
In no way is the wage price spiral "debunked" by your articles. It exists. They agree the correlation exists. The only question is: is the wage increase broad or narrow. It is clearly broad right now, and that makes inflation itself stickier, which is inevitably bad.
Viewing a single comment thread. View all comments