Are we starting to see the wage increase vs inflation increase death spiral?

Dolph said:
The problem with that is that we have already been practicing squeeze the rich taxation for a good number of years in this country. The people who aren't paying enough tax (based on international comparisons) are those at the lower ends.

We need to become a much less jealous and selfish society, at all levels, for society to work better.
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That needs to be seen in the context of public spending though which sees the U.K. lower than comparable countries. Increased taxation should go straight back into public spend and investment.
 
Well I just dropped into here to see if there was a spark of positivity. Nope, just the usual doom and gloomers. I wonder if you guys are even able to get out of bed to face the world sometimes :D.

Can anyone actually suggest any positive next steps or are you all gonna just moan like a load of old housewife's?
 
Yeah it's felt like the beginning of the end for a year or 2. But 2022 is something else. Covid was nature. It happens.

This year there is no clear end. There is no real solution. Putin has really turned the screw and I wouldn't be surprised if he's so selfish he'd push the button on his death bed. Even with his kids.
 
azazl187 said:
Well I just dropped into here to see if there was a spark of positivity. Nope, just the usual doom and gloomers. I wonder if you guys are even able to get out of bed to face the world sometimes :D
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Sometimes when you think everything is turning to **** is when you live the most! :D
 
There has been a wage price spiral happening for years already - in housing. (Cheaper debt & climbing low end wages have been pushing up the bottom of the market for a couple of decades now).

So yeah, I think it will make things worse in the sense that it will make persistent a current transitory inflation issue.

Don't know what the solution is though - rich people can afford to cope with it, most other people can't so why shouldn't we be given rises.

However some of the offers being turned down (a £2k one off payment!!!) are obscene.
 
You do what you can to protect yourself and ones around you. Theres not much else a typical individual can do.

My friend who seemed to easily get a mortgage (single mum, older kid, 30-35k)cant get a remortgage she's a tad anxious
Probably a combination of lenders tightening lending and maybe lenders pricing in falls?
 
azazl187 said:
Well I just dropped into here to see if there was a spark of positivity. Nope, just the usual doom and gloomers. I wonder if you guys are even able to get out of bed to face the world sometimes :D.

Can anyone actually suggest any positive next steps or are you all gonna just moan like a load of old housewife's?
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You do realise that you're moaning about the thread content and haven't provided any suggestions for positive next steps. :p
 
I think it's great that the workers have the bargaining power for a change. This is a post covid boom in a way so we have demand and supply side inflationary pressure going on (more so on the supply side according to economists). Eventually supply side will resolve itself and inflation will come down, current projections if I recall show that inflation will come back to below 2% somewhere in 2024.

I do not think death spiral is a feasible scenario because real wages are still going down, people will have less money to go around. Then there are structural shifts such as cheap goods from China and cheap energy from Russia. If companies will start to shift to local more expensive production then real wages will continue to decrease for a long time.

Eventually it will balance out I reckon.
 
Some people haven’t been making things easy for themselves.

Too big a mortgage, car on finance, holidays on credit cards generally spending everything they earn. Pay rises will just go to the already obscenely wealthy corporations anyway in higher bills.
 
danlightbulb said:
However some of the offers being turned down (a £2k one off payment!!!) are obscene.
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Well that depends how much you earn, at £40k that is a flat 5% in a single year boost. Quickly eroded by inflation, so the lump sump and 4% pay increase is still a net pay cut for many workers. Low paid earners will disproportionally benefit though.
 
One More Solo said:
That needs to be seen in the context of public spending though which sees the U.K. lower than comparable countries. Increased taxation should go straight back into public spend and investment.
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That doesn't really counter what I've said though. You shouldn't have significantly increased spending without significantly increasing tax, so the under taxing of the majority of earners in the UK is the cause of the underspending.

The UK has a major problem where taxation and spending is involved, and that is the constant desire, across the entire electorate, to make negatives someone else's problem, while benefiting from the positives.
 
eddiemcgarrigle said:
Thing is though, inflation and high prices where already here before the recent demand for higher wages. Wage demands did not cause this.
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The theory is the spiral starts with inflation due to X internal or external factorswhich then triggers the initial demand for a pay increase to cope with the inflation and then it becomes self fulfilling. You could argue we have seen the inflation from energy, fuel and food prices in part due to the ukraine crisis and now we are seeing the first glut of demands for pay increases to cope.

Of course the spiral is a theoretical model and not a written rule but in a way it does feel like we entering cycle 1 of the spiral
 
200sols said:
No it isnt. Wage price spiral is little more than theory and inflation pressures in the UK are mostly external.
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The 1970's would like a word: it wasn't a theory back then.

The way out of it is going to need a combination of factors:

- Increased interest rates to encourage investment in productive industry and less in speculative junk. With rates so low over the last 10+ years, investors had nowhere to put their money other than into inflated stock price values or high risk speculative stuff like crypto. This year has seen both those bubbles deflated somewhat.

- Energy efficiency. Oil and gas prices are a big source of inflation right now. Is every journey you make by car essential. Is every piece of plastic tat you use and throw away really needed. Can the industry be more efficient in production (e.g. common to flare off gas at wellheads instead of collecting it). Can we switch to alternative energy sources e.g. wind, nuclear etc. Increased prices are a big stick to encourage all this.

- Labour productivity. Its pretty easy to justify a 20% rise in salary if you can change how you work to produce 50% more "output" (numbers plucked out of my rear end to make the point). Use of automation, removing pointless activities, IT systems to speed up processes. I think everyone can see some parts of their working day that are just pointless wastes of time or just take too long for no good reason. Lots of small improvements add up.

- Logistics. We are still clearing the logjam caused by COVID shutdowns. Before COVID, industry had a predictable supply chain which meant they could run with low stocks of input materials as you could rely on stuff needed for tomorrow's production arriving today. Now everyone needs to order buffer stocks which is leading to inflated prices and an artificially increased demand. This needs time to solve and China (as the source of many items) to realise their lockdown strategies for COVID outbreaks aren't working.

I'm sure there's more, but I need to switch to productive work now.
 
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Rroff said:
Something is gonna have to give.

I got a pay rise March/April this year and already it has been cancelled out by the increased cost of living so I'm essentially back where I was.
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Same here, pay rise in March, wiped out in April by the increase in energy prices, never mind all the other increases :(

Mr Wurley said:
Yeah. Forgot climate change . What a mess we are in. Some of my mates wonder why I play games at 47. Escapism, that’s it.
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You call it "escapism", I prefer the term "practice"... the raytracing effects in the next Metro "game" are going to be fantastic :p

413x said:
You do what you can to protect yourself and ones around you. Theres not much else a typical individual can do.

My friend who seemed to easily get a mortgage (single mum, older kid, 30-35k)cant get a remortgage she's a tad anxious
Probably a combination of lenders tightening lending and maybe lenders pricing in falls?
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I thought there was some legislation passed in the last few years to protect these "mortgage prisoners", forcing their existing lender to offer them the same products as existing customers (assuming they've kept up repayments etc.). Obviously if her existing lender is no longer offering mortgages then that doesn't help :s

Edit: Ok, not quite legislation forcing them to offer, but the FCA appear to have updated their affordability guidance to specifically allow it.
 
Zenduri said:
The theory is the spiral starts with inflation due to X internal or external factorswhich then triggers the initial demand for a pay increase to cope with the inflation and then it becomes self fulfilling. You could argue we have seen the inflation from energy, fuel and food prices in part due to the ukraine crisis and now we are seeing the first glut of demands for pay increases to cope.

Of course the spiral is a theoretical model and not a written rule but in a way it does feel like we entering cycle 1 of the spiral
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So long as pay rises only include external pressures and stops there I don't see the issue since most of the pain goes away with only a little added pain on top since salaries aren't 100% of a products cost.
 
I find the idea that the workers should gracefully accept significant erosion of wages bizarre. And leads me to wonder what the end game is? Is minimum wage going to continue to increase at a faster rate and swallow up all typical skilled/qualified/experienced jobs? Why would anyone try and better themselves if there is no, or insufficient financial incentive? What are businesses going to do if they set up shop far away from communities in car centric business parks? No one will want to continue paying current fuel prices to get to work.

Don't forget this Conservative election pledge; making sure that work always pays. They are on course to break this along with their national insurance pledge and become unelectable.
 
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