Hacker News Reader

Comment by cs702 | Hacker News Reader

[Please ignore this comment. It is WRONG. I wrote it in haste without thinking it through, and without looking up data.]

ORIGINAL COMMENT:

IIRC, the federal government employs around 24 million people.

Private employers everywhere in the US will have to follow along to remain competitive, so this is going to result in a 5.2% annual rate of increase in income for employees nationwide (give or take) through the end of next year.

Companies will likely try to pass this to customers in the form of price increases.

To me, this suggests inflation is nowhere near under control.

View on HN

The federal government employs about 10% that number. You'd have to add all the state governments together, plus the federal government, to get around 24 million[1].

[1]: https://www.statista.com/statistics/204535/number-of-governm...

You can look up the GS payscale here [0], and a high level description of each level here [1]. I've crunched the numbers many times, and the private sector pays better. There's some situations and professions where it's close, but they generally require unusual circumstances. Perhaps the most interesting part is looking at how to leverage benefits. CSPR has several situations in which you can collect a full inflation adjusted annuity at fifty years old[2], which changes the math for a comparable twenty or thirty year career in the private sector.

Raising the federal pay rate by 5.2% won't make federal employment competitive with private. Maybe it will change the balance for local and state government employment.

[0] https://www.opm.gov/policy-data-oversight/pay-leave/salaries...

[1] https://gogovernment.org/all-about-government-jobs/pay-and-t...

[2] https://www.opm.gov/retirement-center/csrs-information/eligi...

Can you provide evidence labor is driving broad inflation?

Supply chains are normalizing post COVID, energy costs are coming down, egg inflation was avian flu killing tens of millions of birds, and housing is lack of supply. There is also some evidence corporations are juicing profits under the guise of inflation.

What does that mean? Persistent, broad-based inflation is usually a feedback loop where high prices both force employees to ask for raises to afford the cost of living and give employers the free cash flow to afford those raises, and then those raises mean there is more disposable income that can be captured by higher prices. It's "driven" by high labor prices in the same sense that the chicken came first. (And in almost all cases, just like the egg comes first, the price increases come before the wage increases.). But that's immaterial - it matters that we're seeing these wage increases and so there's a high chance that we're in a wage/price spiral already.

Inflation can be driven into a wage price spiral, but there isn’t sufficient evidence currently that such a spiral is occurring.

https://crsreports.congress.gov/product/pdf/IN/IN12075

https://www.imf.org/en/Blogs/Articles/2022/10/05/wage-price-...

u/jonathankoren‘s sibling comment also touches on this

https://news.ycombinator.com/item?id=35077763

Yes this is a cause of inflation, but not the cause of inflation today.

Today, much of the inflation is cost-push instead of demand-pull like you described. Cars became expensive, not because suddenly everyone had money to go buy a car, or suddenly those peaky autoworkers caught a raise, but because the parts to make the cars didn’t exist because of supply chain problems brought on because of Covid lockdowns.

Eggs are expensive because chickens are dying of avian flu, not because undocumented laborers getting an extra nickel.

Same with oil, grain, pretty much everything.

Employees asking for raises results in basically nothing unless the employee has leverage so broad-based raises are a sign of a market that wants to hire more labor than is readily available (of course, this is what led to a lot of that aforementioned housing inflation, but it wasn't as tight across as many industries as it is now).

Major cost of living components like housing have been going up rapidly for tens of millions of people in major metro areas for a decade. Employees wanted more money the whole damn time. They didn't get much willing movement there; they didn't have the leverage in the employment market. Legislatures in many areas stepped in instead after failing to see wages in most industries keep up.

It's not clear to me that this particular version of the feedback loop is inherently bad long-term or unstable. Why should I assume it's going to spiral out of control rather than eventually slowly grind to a new equilibrium as some employers can't keep up with market wages and fall out of the market and supply vs demand stabilizes? And government wages seem like the least relevant - government pay was uncompetitive in so many areas to start with.

They say this will affect about 2.1 million employees, FWIW.

Since when has the federal government been known to pay competitive to the private sector?

This sounds more like well worn ideological talking points, than a real concern.

I don't see this spiraling. It affects less than 1% of the population, and government jobs tend to pay lower than equivalent private sector jobs so this is more about the government trying to remain competitive. The private sector won't need to do anything to compensate.

I doubt it. Most companies don't give cost of living raises that high. People will have to switch jobs to create enough pressure.

If labor drove inflation then we wouldn't be seeing record profits. Prices increase when owners of business decide and usually whatever they think they can get away with.

The GS pay scale is phenomenally lower than private sector equivalent jobs in every single metro area, to the degree that the US government has geo-based pay supplements which still don't bring those jobs into equity. People like federal jobs because of the stability and the benefits, but there is no way in hell that federal salaries are driving inflation.

Reply on news.ycombinator.com