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Comment by dexwiz | Hacker News Reader

I love that a key point is that this drives inflation, instead of crazy inflation forcing people to look for higher paying jobs. /s

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Wages have been a lagging indicator for almost 50 years now. Anyone who portends that wages drive inflation is not worth listening to. Wages have not kept up, today, nor will they tomorrow.

Wages have somewhat more than kept up with inflation.

1955-2017: https://www.statista.com/chart/18418/real-mean-and-median-fa...

1984-2021: https://fred.stlouisfed.org/series/MEHOINUSA672N

(I couldn't find a single series that ran 1950s through 2021/2022, so had to use two above.)

Those charts show wages growing at an annualized rate of 1.5% at best. Any years with inflation greater than 1.5% were effectively years of wage LOSS, rather than growth. Most of those years had inflation greater than 1.5%.

Edit: this math is bad, see sokoloff's comment below.

QED

Doesn't the "adjusted dollars" mean the numbers are already adjusted for inflation? Pretty sure the median wage in 1984 was a lot less than 56K in 1984 dollars.

Those charts show real wages, not nominal wages. "Real" in economics means "after taking inflation into account".

https://www.investopedia.com/terms/r/real-value.asp

A year showing any growth in real terms is a nominal growth that is higher than inflation.

Fair enough. There still seems to be a disconnect though, as the cost of various goods, such as housing, have far exceeded inflation. Are there any charts that try to track wages against a basket of goods?

That's what the CPI is and the real wage growth charts are exactly what you're asking for.

That being said, there's definitely a disconnect. The CPI metric is constantly changing, and is such a broad economic indicator that many people's experiences will not "feel" like what the federal data suggests.

The root of the growing wealth gap is the massive deficit we've been running. Especially since the GFC, the strategy has been to rack up a bunch of debt and inflate that debt away. This inflates the value of financial assets, property, and commodities...none of which is owned by the average joe whose cash savings gets destroyed in the interim.

I agree with everything you say except for one point:

> none of which is owned by the average joe

About 66% of US households "own" a home (often with a fixed-rate mortgage, which makes rising inflation doubly good for those homeowners) and 58% of homes are owner-occupied. The median Joe is a homeowner, not a renter.

Yeah you’re right thanks for the correction. I’d rephrase to say among those three categories cumulatively most Americans own very little.

This all started when the dollar stopped being indexed on gold

okay, now explain how those things are in any way related to what's going on

going downhill does not stop

Not really. The divergence only became meaningful in the 80s which corresponds closer to Reagan's economic reforms and the massive chilling effect on unions that occurred in that period (ex: the 1981 PATCO strike and Reagan's subsequent retaliation).

We had inflation before the 1970s.

The divergence happened in 1914, starting the very next year.

That divergence reached 2:1 around 1929, and (as always happens when currency is inflated while being pegged to something else) a massive correction occurred (the banks collapsed). The response by FDR was to make it illegal to trade dollars for gold.

Then for decades there was the absurd fiction that the dollar was pegged to gold, but of course nobody was allowed to make such a transaction. This continued until the 1970s when that ersatz pegging was repealed.

"Inflation" really means "wage inflation" for planners and the media. Wage inflation is the bad kind of inflation, as opposed to the good kinds of inflation (e.g. food price gouging).

indeed. compare what the media calls "price growth" (e.g. housing) and what it calls "inflation" (e.g. wages)

Anyone notice interest rates only started increasing when wages started going up but not when housing costs went up first?

I'm sure the people making decisions about interest rates did :)

>> I love that a key point is that this drives inflation, instead of crazy inflation forcing people to look for higher paying jobs.

This type of argument makes it seem that workers are at fault for inflation. That isnt true. Workers are stuck in an inflation loop until inflation is tamed.

The inflation loop didnt start with greedy workers, it started with prices going up due to monetary policy...catalyzing the loop.

Called the wage price spiral. However data from fed doesn’t show we have one currently ongoing. With most workers getting screwed over.

The caveat to the "wage price spiral" is that we live in a system that demands ever growing profits. Given that profits are the surplus that remains after wages are paid, this means we expect the portion of prices that goes towards wages to be reduced over time. This means profit growth requires either wage suppression (easy) or a higher output per employee (difficult). If wages go up instead of being suppressed, this adds to the existing market pressure to increase profits while also removing and in fact inverting one of the two major mechanisms to increase profits. According to traditional economical theory this means the only thing left to do is increase prices to at least maintain profit if not profit growth as well.

In other words, the reason the system demands higher prices if wages go up (while the worker demands higher wages if the prices go up because they literally need money to survive) is not simply that higher wages drive up production cost but that businesses also need to maintain and increase their profits, i.e. the surplus that remains after all stock is sold, all services are rendered and all costs are paid.

There is no way to change this within the system but concluding that this means the problem is unsolvable mistakenly assumes the system can not be modified or replaced with one that does not have this resource allocation problem. Such a change just wouldn't benefit those currently holding a disproportionate amount of resources and wealth as much as the rest of us so it's not likely to happen without sufficient external force (and even then only if that energy is not directed elsewhere).

Need to question why plebs dare to ask for more

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