I just read some clever comedy in the New Yorker by David Sedaris and it settled in my mind. Shaking my head doesn’t work. Thus, trying to write about wages and inflation I slipped into …. Well, I’ll briefly share.
In this after-world of all powerful wizards flicking their wands, I had accepted assurances that the malevolent man in the White House has been causing inflation and subjecting me to such excessive inconveniences for no reason other than to encourage my vote against his party at the midterm election. Then I came upon the radical thought that there are multiple plausible causes for practically everything.
Easy to overlook among them is the possibility that some contribution to inflation is necessarily to reboot economic life when income inequality becomes too great for the economy to support.
If large numbers of people hold jobs that pay less than what we call a “living wage,” meaning the bottom rung of respect and dignity, a readjustment will mean a small shudder across the cost of things.
Tom gets a raise (because it is hard to get someone still breathing for the job) and Alice ups her prices, and therefore I experience inflation.
I don’t find this exactly a reason for apocalyptic anxiety. But I suppose I should leave others to make their own choices for existential dread.
Seriously, and apologies to those with a finer sense than mine of appropriate humor, I think we need to recognize that inflation has many sources, some of them quite temporary and among these are the need to rebalance lower level wages.
In a modern economy it seems that compensation for minimum wage work falls behind both normal inflation and the reasonable expectations of living an “American Life.” (I’m factoring in the idea that people come to expect indoor toilets and color TVs as floor level living standards, among other “luxuries.”)
Crisis events (like Covid) provide the opportunity for a readjustment. (A bounce in consumption preceding an increase in job seeking.) Such increases in cost reverberate through the economy. Very likely a one-time “shock,” although the possibility of a runaway effect is marginally likely. (This has to do with expectations, and survey data shows that people in general at this time do not expect inflation pressure to continue to rise.)
And, of course, from my perspective this is a good thing. Actually, some level of satisfaction with job, income and prices, among the less rewarded in a competitive society, is necessary for social stability.
There are other ways in which re-balancing might occur, i.e. raising the minimum wage or providing government subsidies for workers. But, in lieu of these, lets accept what is given.
However, and this is a CAPITAL LETTER however, this doesn’t work as it should when quasi monopolistic firms jack up prices well above what is needed to offset increased costs needs. In the absence of adequate price competition this is what inevitably happens, particularly for basic commodities.
For all my friends, on either side of the partisan divide. Before deciding to place all the blame on “the Great OZ,” look behind the curtain in the corner. Realizing that inflation rates are comparable in virtually all industrial societies, I tend to think that the U.S. government is playing a relatively small role in domestic inflation, and may well be doing better than we realize. In any case, we are all better off when we use careful balanced judgement and consider the complexity of serious issues.
Sorry, again, for the somewhat lame humor with which I began this blog.