How is it that inflation can affect everything EXCEPT wages?
In: 143
Because inflation doesn’t affect everything.
Inflation has never been a single measure that means all prices increase by the same amount. Things like the CPI are literally defined as an AVERAGE of the change of prices. I strongly recommend you look at the BLS website on the CPI and how they calculate it. Random redditors are very bad at looking at primary sources and the BLS is extremely transparent about what exactly goes into the CPI and how it is calculated and why they make changes they do. You don’t need to guess, they literally tell you. And Reddit is absolutely full of BS on this front as conventional wisdom is made by the equivalent of that doomsayer standing on a corner with a cardboard sign and they have never actually read anything about how inflation rates are actually calculated and what impacts them.
Details on the CPI and what is increasing/decreasing in prices. Notice how not everything is going up by the same rate. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm
Details on what is included in the various CPI categories: https://www.bls.gov/cpi/factsheets/
Everything in an economy is affected by supply and demand. This applies to food, cars, houses, and yes labor. The thing about the last few decades is the demand for labor has been dropping. That’s what happens when we say workers are getting more productive. Rather than producing more, companies for the most part have been cutting employees. An army of accountants that large businesses used to hire to run their finances are reduced to a small team of accountants with the use of accounting software. This is what happens when supply of labor outstrips demand for labor, wages go down. And this will only continue as our economy becomes more and more automated and worker productivity continues to rise. There are plenty of systemic reasons for it but from a pure supply/demand standpoint this is why wages have not kept up with inflation. Because there has been a deflationary pressure on wages for decades. And this is why moving manufacturing back to US shores from China wont do much. It’ll produce some jobs but manufacturing is never going back to the old days of armies of factory workers. It’ll be a handful of specialists managing automation.
That’s not to say inflation doesn’t have wide ranging impacts. But it strongly depends on what is inflating. For example, the problem we face now is inflation of energy prices due to shortages driven by Russia’s actions leading up to and immediately after the Ukranian invasion. People conveniently forget that Putin was literally choking Europe in the leadup by limiting gas exports that caused prices to rise and depleted Europe’s gas reserves. There’s a reason why US intel was saying Russia was planning for an invasion, because they literally were.
Plus there’s the ongoing inflation in producer price inflation: https://www.bls.gov/ppi/
That’s being driven by supply chain issues and rising labor costs which will have wide reaching impacts as well.
Also Redditors love to bring up Milton Friedman as some all knowing inflation god. His age old wisdom that all inflation is due to monetary supply is sorely lacking as his economic theory hasn’t worked to predict anything accurately about inflation for the last 30+ years.
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