this post was submitted on 31 Mar 2024
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United States | News & Politics
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Raises usually lag behind inflation, but generally keep pace with it, more or less. If the economy is increasing in size, inflation is going up, and real wages are keeping pace, you get stagflation, which is pretty much where we are now. Wages have broadly gone up, but so have prices. This is especially a problem because the labor market is very tight right now; it's very abnormal (broadly speaking) to see a very, very tight labor market, and also see real wages not rising. In a tight labor market, you should see costs of labor rising faster than prices as businesses compete for workers. But that's not what we're seeing; instead, we're seeing corporations ensuring that they retain exactly the same profit margins.
OTOH, with deflation, your wages do get cut, because you get laid off, and cheaper labor is hired to take your place. Deflation is almost always coupled with higher unemployment.
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I believe that most people have largely been seeing their wages keeping pace. It's the disconnect between seeing their wages rise and not seeing any increase in purchasing power that's leading people to think that the economy is bad. But--again--this is stagflation. With a combination of factors, it feels really bad, even though most people are not objectively worse off than they were. And, compared to the height of the pandemic (which was all Trump!), the vast majority of people are doing far, far better than they were. What I mean by people aren't worse off is that you aren't seeing a sharp rise in indicators of economic distress, like people defaulting on mortgages or car loans. But--again--it feels bad because it's easy to remember when a box of cereal was $7 instead of $10.
When you talk about wages v. productivity, then no, wages don't even come close to tracking.
Love that you totally ignore the wages v. income. Ha.
I would hardly call getting a car a "bad financial decision", given that cars are a practical necessity in the US. Fundamentally, people right now are doing better than they were four years ago. The data backs this up.
The housing shortage traces back almost directly to the pandemic. The first house I bought was in 2013-ish, and houses were cheap because enormous numbers of people had defaulted on mortgages after the 2008 crash. There was also an enormous supply as a result. Construction halted during the pandemic as building supplies dried up, and unemployment skyrocketed. Now that wages have been rising, you have too many people bidding on too few houses, which drives up costs. Once--if--housing supply catches up to demand, you can expect to see prices fall again. Anecdotally, there was a lot of farmland around me that had been bulldozed shortly before the pandemic, and then it just sat, with pretty signs touting the development that was going to go in. It's only been in the past four years that they've started building again, and they're almost full now.
Hate to state the obvious, but these things are, in fact, linked. The finance bros don't exist in a vacuum where labor magically happens that they can skim profits from.
Wages v. Inflation; typo on my end. And it was right there in the link.