How is it that inflation can affect everything EXCEPT wages?
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You probably thinks that’s inflation is normal and the absurd is the wage won’t go up, but the absurd is inflation exists.
Price setting in the labor market is done by firms.
They will try and stick at their same nominal wage for as long as possible. So obviously peoples real income is taking a hit. Eventually, firms will need more employees, so they will choose to raise the nominal wage to account for inflation.
When prices go up and this brings real wages(W/P) go down. The effect of this is that unemployment tends to rise as firms aren’t keeping up with wage demands. Eventually firms adjust wages when they need people.
Firms as the price setters will tend to be stubborn at first in regards to changing wages.
Not an expert here but it seems to be like when the stock market is doing bad then people can view the stocks are on sale, like at a discount. When inflation hits employers are viewing their employees labor at a discount considering the costs of the of all other goods has increased in cost. Employers are generally shitty people who just care about their bottom line and will do all they can too keep wages as low as possible.
Some people like to call it “sticky wages,” but it’s essentially just that employers try to not raise wages as hard as they can. Only when their workers might quit do they start handing out raises.
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