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Comment by refurb | Hacker News Reader

Everybody wants to control inflation until it's time to suppress wage growth.

The Bank of Canada even came right and out said that employers should definitely not raise wages quickly.

https://www.theglobeandmail.com/business/article-wage-negoti...

Bank of Canada's position is very nuanced, but all the nuance is ignored by their critics. They never asked employers not to raise wages this year. They asked them not to bake in e.g. 8% per year wage increase for the next 10 years if they are negotiating a long term contract with a union. The rationale is that while 8% raise this year is reasonable given the inflation rate, the inflation rate will not remain high for the next decade, so it will be too high further in the future. If many bind themselves with high wage increases long term, we will have high inflation for a long time due to the effect of the cost of labour on prices.

> “Don’t build that into longer term contracts. Don’t build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down.”

Thank you for pointing this out. As much as I like to criticise the government (in many cases, well-deserved), it's important to keep a nuanced perspective and reserve criticism for cases that indeed warrant it. Not basing long term contracts on short term economic fluctuations seems like a reasonable policy.

If you're going to account for inflation in a contract, I believe indexing is the preferred method anyway. Many government pensions - and some salaries - are indexed to inflation.

Since wage hikes historically have not matched inflation, I don't see anything wrong with hikes that surpass inflation rates.

We have a lot of catching up to do, and incumbents designed this system so that healing the gap hurts the bottom line of voters, so there is simply no painless way out of it. We've all been paying towards a debt that is about to be realized.

Not sure that's much better? Tiff also said "inflation is transitory", but hey, here we are.

And if I'm a union guy negotiating my next 3 year contract and I listen to Tiff and only get 8% this year, then 3% the next two years, is Tiff going to pay the difference when inflation isn't under control?

Weird how government agencies that fall to regulatory capture all keep advocating for things beneficial to the industries they oversee.

Sufficient tax increases for the well-off would have the same effect as punishing the working class, but that's never an option for some reason.

Not exactly — wealthy people don’t spend most of their money on goods & services, they leave it parked in investments. Reducing a wealthy person’s net worth don’t really affect how much they spend on consumer goods.

A poor or working-class person spends (nearly) all of their money on consumer goods. Give them 10% more money and they try to buy 10% more things.

Restricting money on the wealthy doesn’t reduce demand for GPUs for example, but restricting money on low-middle income people does. That lower demand for consumer goods is how you can slow inflation.

Then tax the wealthy and put that money into the hands of people who actually need it.

Well that causes inflation, was my point, because that money wasn’t (isn’t) being used to compete for consumer goods.

But by redistributing it to lower and middle class, it’s now being spent on consumer goods, increasing demand for the goods, causing inflation.

> Sufficient tax increases for the well-off would have the same effect as punishing the working class

Would they?

From an economic perspective (not a social/fairness one), isn't it well studied that consumption (as percentage of income) is inversely proportional to higher/lower total income?

So raising tax on the well-off would be more akin to raising the prime rate (i.e. decreasing the amount of well-off capital that's reinvested elsewhere) with the added effect of increasing consumption by increasing federal government spending.

Note: I'm not opining on the justness of this, simply the mechanism.

replying to californical:

"Sufficient" is the operative word here. There's a tremendous amount of non-productive rent-seeking, such as literal rents. These are a massive drag on our economy, because they shift investments towards non-productive use. More targeted tax increases to discourage the worst rent-seeking would help a lot, in addition to generating revenue and easing price pressures.

imo, this is actually a fairly salient point. Wealthy people do put most of their cash in investments but not all investments are equal to the health of the economy or as detrimental if toyed with.

No the wise ones realize the very framing of "inflation" is bad. One has to look at which specific prices are rising, and production input output graphs.

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