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Comment by evancox100 | Hacker News Reader

What government is arguing that employee wages should be lower/stagnant in order to fight inflation?

EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get?

Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", not a lot of "Please turn down your pay increase so we can fight inflation." The reason no one would actually say the second is it is a ridiculous collective action problem that is obviously unsolvable on the employee side. The Australia governor warned against a 5.75% pay raise for govt employees (I think), but he was addressing the employer in that case, not individual workers.

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The UK government has done this various times in the last couple of years to argue against (high) pay rises for the National Health Service and other government institutions.

One of the more recent articles: https://www.reuters.com/world/uk/uk-annual-wage-growth-72-ex... Or here: https://www.theguardian.com/business/2022/jun/20/would-a-wag...

So the one exception that I considered putting in would be cases where the government is the employer and is negotiating with their employees. And yes of course, they will use whatever arguments they can to come out ahead in labor negotiations, like any employer.

I didn't see any mention of calls for workers to accept lower wages in the first article. In the second article, such calls were mentioned but not explicitly referenced or quoted. (Maybe they would be familiar to a British audience.)

But I would say that is different than asking for private sector workers to accept lower wages as an inflation fighting strategy. And note that the actual fiscal policy that the UK has pursued is wage subsidies, as much as 650£ - 1000£ annually it seems. (As described in the second article, not something I'm familiar with beyond that.)

UK govt spokespeople have regularly argued that employers and employees, both public and private, should limit wage rises or accept lower rises to avoid inflation. It’s mad, but that’s actually what they say.

Ironically, they are most vehement when claiming wage rises in the public sector cause inflation, despite ethe evidence there being much weaker (or non existent according to many economists).

UK Government is a right-wing government right? Their goal is to help big business not the employees. Isn't that the definition of right-wing?

Telling workers to accept lower pay makes about as much sense as asking companies to accept lower profits. Yes you can ask but they will not obey.

Sunak regularly has called on UK private sector leaders to show "restraint" when deciding pay awards. One such example:

https://www.bloomberg.com/news/articles/2022-11-15/uk-s-suna...

What he should be calling for is for private sector leaders to show restraint when raising prices. But he doesn't. That just tells you whose side he is on.

Sure but that's an appeal to the employer setting the wages, not the worker. (Or is he talking about executive pay for themselves? I couldn't read the article.)

The thread is about exactly that: an appeal to the employer in the form of advocating lower wages as a means to combat inflation.

Ok, you are pushing your definitions into unreasonable territory.

A central bank saying inflation is caused by high wages is exactly the same as the government telling people they should get a lower wage. There is no practical difference.

It is in fact worse, because the central bank tends to act on that phrase. So the government not only tells people they should earn less, but forces their hands into that.

Right, but the central bank knows that IT is the one forcing the lower wages. They're not standing up there asking employees to shred part of their paycheck, because that is obviously dumb. The original person was talking about what workers should do "out of the goodness of their own heart." But no central bank is asking workers to take action, they are forcing workers' hands, explicitly.

You may think that is better or worse, but it is not appealing directly to workers to throw away their pay check.

Central banks can only affect interest rates. And they will take the same action whether prices are rising due to wages or profits.

The U.S. Federal Reserve hasn’t advocated people voluntarily take a lower wage, but they have explicitly stated that their goal for raising rates is to put people out of work so that they’re forced to accept lower wages. You can see Powell’s FOMC transcripts from late last year for many examples of this.

Probably referring to news like this?

https://www.nytimes.com/2023/04/28/business/wage-inflation-m...

Can't read the full article but the headline seems to say that the fed is hoping for wage increases to slow, but that would be because they have tightened monetary policy. That's different from the fed chair getting up and saying "Workers, please ask your boss to pay you less so we can fight inflation."

Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out of work, to the extent of provoking a recession if need be. So yes the fed is looking for some pain in the labor market to see that things are working, though they would love for inflation to come down without a recession too.

But high inflation is also bad for workers, because wages in general don't keep up in real terms (re-negotiated infrequently, leverage imbalance between company and worker, status quo bias, etc.). The higher inflation is the larger you can expect companies profit shares to be (case in point, the original article). Also really high inflation seems bad in general for the economy, both workers and companies.

> "Workers, please ask your boss to pay you less so we can fight inflation."

that is, more of less, ahat bank of england has announced.

"no, they're not expecting people to just take less money because wages are sticky and that wouldn't happen anyway, they're just trying to put everyone out of work so you have to renegotiate at your next job"

ok so you agree with the general thesis but not the exact mechanism? why quibble then?

Australia

https://www.canberratimes.com.au/story/8054911/rba-wants-wor...

In before someone argues that RBA isn’t part of the Australian capital-G Government, the organisation certainly is part of the governing institutions of Australia.

Well, the US Federal Reserve is/has, for one. Here's an article titled "Fed’s Powell cites top barrier to taming inflation — workers’ wages": https://www.politico.com/news/2022/11/30/feds-powell-inflati...

Now, of course, he's not saying to any particular workers "Hey, stop asking for much higher wages," but he says plainly in the final paragraph of the article:

> “The labor market … shows only tentative signs of rebalancing, and wage growth remains well above levels that would be consistent with 2 percent inflation over time,” he said. “Despite some promising developments, we have a long way to go in restoring price stability.”

How would you suppose workers are supposed to have wage growth "consistent with 2 percent inflation" if said wage growth were to greatly exceed that magical 2% number? This is the Fed literally saying "Please turn down your pay increase so we can fight inflation," except that there's also the implicit thread of "... or else we're gonna have to make sure a bunch of you lose your jobs so it all balances out. It'd be a shame if that happened, wouldn't it?"

In Sweden the government has absolutely argued for low pay rise to fight inflation. Even the unions got in line this year. Here is an example https://www.thelocal.com/20230117/explained-why-swedens-unio...

USA enacted a wage freeze for both for WWs and for the Oil Shocks.

https://en.wikipedia.org/wiki/Nixon_shock#:~:text=Nixon%20is....

> USA enacted a wage freeze for both for WWs

It also enacted price freezes and rations.

Note that this references an event in the Nixon administration, in 1971 (52 years ago).

One point is that they “argue” through their policies. It seems like there is much more government tolerance for “stimulating” the economy when it most benefits corporations (lower rates and/or bailouts) than it does when it disproportionately goes straight to citizens (stimulus checks)

>What government is arguing that employee wages should be lower/stagnant in order to fight inflation?

Austrian government for one because they're the pawns of the big industry. But I'm sure other governments too.

The incompetent morons in the Danish government does.

They are all about cutting those wages to 0. Less employment.

It’s called wage compression. It’s thought to be a good thing. I don’t enjoy it very much.

Sweden

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