How is it that inflation can affect everything EXCEPT wages?
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Wages aren’t unaffected by inflation, they just tend to be slower to increase, primarily because employers tend to avoid raising wages for as long as they can get away with it (especially in low-wage sectors).
Inflation does affect wages. Look at a graph of wages over time and you will see that for the most part, they keep pace.
People are right to say inflation does effect wages.
But the fact that wages are slower to change, and don’t keep up in the long run shows that wage negotiations are not a free market even as much as consumption is.
Wage negotiations are mostly asymmetrical. Companies are big, employees one at a time are not equally powerful. Collective bargaining, unions helps fix this. Industries with unions keep up with inflation better in the long term.
Wages have been climbing due to inflation, but business adjust prices more variably while wages tend to adjust at time of hiring or annual review cycles. All those businesses offering $15/hr for formerly minimum wage jobs is a response to inflation. Businesses have been giving larger than typical cost of living increases (mine was twice typical).
Wages are affected by inflation. If they weren’t we would all still be making a few hundred bucks a year in the U.S. Wage increases due to inflation will trail behind inflation increases because they are normally reactionary in nature. They happen after inflation reaches certain levels.
To better answer your question though, inflation is a measure of the devaluation of currency. It is accomplished by tracking the cost of a variety of goods and services over time to compare their prices today vs last month or a year ago or ten years ago. It is solely determined based off of the goods and services that are tracked. Wages are not a part of the measure when determining inflation rates.
Increased wages can be a contributing driver of inflation. The more money people make, the more money they can spend, so the more businesses are able to charge.
>ELI5: How is it that inflation can affect everything EXCEPT wages?
An inflation-adjustment of your wage is a price increase for your labor. Unless you have a union negotiating on your behalf it is **you** who has to make that price adjustment, i.e. negotiate a higher wage or a contractiual regular wage adjustment.
Since not every employee actually *does* that and no employer not affacted by a labor shortage is going to do it on their own accord, wages – on average – are slower to rise.
Power.
A company in fierce competition wouldn’t be able to raise prices least they lose all their business. But if they’re dominant / powerful / their customers don’t really have a choice / (or they collude with the competition) then they can raise prices and force customers to pay more.
If a worker sees inflation is 7% from this time last year, and can demand a raise of at least 7%, then the employee has the economic power to at least keep up with inflation. If the boss says “no”, and the worker can’t find work elsewhere, then they are powerless.
None of this happens automatically. Someone decides to raise the price of eggs. Someone decides to go demand a higher wage.
With the pandemic ending (since we’re vaccinated now) businesses are starting back up and we’re in a rare golden moment where workers are in demand. Get while the getting is good. If your wage doesn’t increase by the inflation rate, your boss is giving you a pay CUT.
The moment inflation affects wages it “runs rampant”, because apparently that is not what currently happening with everyone dumping everything in the stock market and the global market capitalization being like 150% of the GLOBAL GDP.
Wages are part inflation. Inflation is the general rise in prices. Some rise more than others. Right now gas is more expensive and some computer parts are going down in price.
Wages are for sure rising faster than usual, just not keeping pace with the recent spike in consumer prices.
Some companies give small “cost of living” increases in wages every year to make up for inflation.
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