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

This inflationary period was entirely predictable and expected. For the last couple of years governments around the world have been pumping money into their economies to overcome problems caused by the pandemic. That money has to come from somewhere and is almost always inflationary. The value of today's money has been eroded to pay for the money created yesterday. That money wasn't free. We are paying for it now and will be for decades.
 
Trifid said:
It really isn't a good look when it is still plastered all over your website though! https://www.conservatives.com/our-plan/economy in previous generations, the pledges would have lined the bins a week after the election.
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It’s almost like they’d say whatever they need to say to get the votes they need to get. The gullible masses believe every word despite history providing many reasons not to believe a single word that comes out their mouths.

A wise man once said if you vote you have no right to complain.
 
Trifid said:
Why would anyone try and better themselves if there is no, or insufficient financial incentive?
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While obviously more desirable jobs are "unlocked" by qualifications/experience etc. at the same time you're right - if the NMW keeps going up and you can get paid e.g. £15/hour for stacking shelves, why would you go to Uni to end up earning only slightly more in a job with more pressure and responsibility and £20k of student debt?
 
Haggisman said:
why would you go to Uni to end up earning only slightly more in a job with more pressure and responsibility and £20k of student debt?
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Probably because they would enjoy that career a bit more? I'd rather feel okay about my work and get some satisfaction out of it than shoot for the bottom and live a life of soul-crushing mediocrity.

Before anyone pipes in, I know the vast majority of people don't enjoy their job but there are levels to it.
 
Ayahuasca said:
Probably because they would enjoy that career a bit more? I'd rather feel okay about my work and get some satisfaction out of it than shoot for the bottom and live a life of soul-crushing mediocrity.

Before anyone pipes in, I know the vast majority of people don't enjoy their job but there are levels to it.
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But then balance that with someone who's already been paying off their mortgage for 3+ years and isn't getting a chunk taken out of their wages every month to pay of their student loan for the rest of their life?

Obviously money isn't everything, but it would definitely make a difference for some.

And yes, as I acknowledged, the work might be more interesting, at the same time do you not sometimes wish you didn't have the responsibility of your job and could just switch off at the end of the day?
 
Hades said:
This inflationary period was entirely predictable and expected. For the last couple of years governments around the world have been pumping money into their economies to overcome problems caused by the pandemic. That money has to come from somewhere and is almost always inflationary. The value of today's money has been eroded to pay for the money created yesterday. That money wasn't free. We are paying for it now and will be for decades.
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A more rational take is this :

Money supply has been inflated for 13+ years since QE started in the wake of the 2008 credit crunch. Retail inflation has been pretty steady for most of that, instead the money has ended up in the equity markets which is where the inflationary effects have manifested themselves quite clearly.

Over the same period, Conservative austerity has slashed real terms wages across the public sector, which they have largely grudgingly put up with (well, the ones that didn't quit, anyway). Private sector wages/jobs in many industries were slashed during Covid.

Cue 2022 and the Ukraine war, energy and food prices go through the roof, which has a knock-on direct inflationary effect on all goods and supply chains.

Private sector workers expect their pay cuts rolled back now industries are recovering post-Covid. The remaining public sector workers who have tolerated austerity so far, are now absolutely shafted by price inflation, and have to act.

QE is undoubtedly *a* factor, but a relatively small one in terms of retail price inflation, there are many factors in play.
 
Going back to the OPs original point though.....wage price inflation spiral?

No, it won't be....think about it. In order for higher wages to cause inflation, people have to spend more. People have less money to spend because it's all going on energy bills and fuel and food.
 
Zenduri said:
Firstly this isn't a thread to discuss if pay increases are deserved or are a reasonable request given working conditions or lack of historic increases as thats a whole new topic to go down.

However, it's to discuss the fact we are seeing more industries striking for better pay of demanding better pay in the last 4-8 weeks citing inflation and the cost of living as one of the primary reasons. While it is understandable to demand more pay during a time of inflation this in itself has the risk of pushing up labour costs and therefore prices which in turn, in theory pushes up inflation even higher, wiping out the pay increase and generate more demand for even higher wages


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A few examples of recent increases and demands are below

Given:
Sainsburys workers 5.3% increase
PWC 7-9% increase

Rejected/Demanded/Disputed:

Barristers 15% pay increase demanded
Doctors 30% over 5 years demanded
Royal mail offered 2%, offerered 5.5%, rejected both demanding higher
Rolls Royce £2000 payment offered and rejected, 4% increase rejected
Railworkers offered 2% and 4% rejected, 7% demand
British Airways demands 10% increase but only to restore this to pre covid levels
Ryan Air (unsure of demands)


Does anyone think we are on the cusp of a wage/inflation death spiral? Are we expecting more and more industries and workers to start demanding more pay? If so, what is your take on the situation and if you dont think we are at the risk of entering this spiral whats your thoughts on how we are/will avoid(ing) this?
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The problem is that these rise in living costs where down to a few factors.

1. Miss management by our government for the last 10 years.
2. Brexit (you can thank everyone who voted for this).
3. Covid-19.
4. The war in Ukraine vs Russia
 
mid_gen said:
People have less money to spend because it's all going on energy bills and fuel and food.
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That is still money spent, doesn't matter what it is on, rent, energy, petrol, food. What you mean to say is they have less money to spend on non-necessities, and will have to cut back on the £60 per month iPhone contracts, and £90 Sky packages, and maybe consider buying a new TV once in 10 years not every 2 years. That sort of thing, no?
 
Journey said:
That is still money spent, doesn't matter what it is on, rent, energy, petrol, food. What you mean to say is they have less money to spend on non-necessities, and will have to cut back on the £60 per month iPhone contracts, and £90 Sky packages, and maybe consider buying a new TV once in 10 years not every 2 years. That sort of thing, no?
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It is a consumption based economy though; so if people don't have money spare to "burn" then the overall economy is worse off. Barely anyone is an essential worker.
 
Journey said:
That is still money spent, doesn't matter what it is on, rent, energy, petrol, food. What you mean to say is they have less money to spend on non-necessities, and will have to cut back on the £60 per month iPhone contracts, and £90 Sky packages, and maybe consider buying a new TV once in 10 years not every 2 years. That sort of thing, no?
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Yes it's still money spent, but it's not increased demand, which is the mechanism that drives price inflation in this hypothetical wage/inflation death spiral.

Demand will be decreasing, as people cut back their expenditure, on both necessities, and discretionary spending.
 
mid_gen said:
In order for higher wages to cause inflation, people have to spend more. People have less money to spend because it's all going on energy bills and fuel and food.
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Not necessarily. Inflation can be caused by demand (demand led inflation) or by increasing costs (cost push inflation). What you are referring to is the lack of demand pull inflation. But what we are seeing is cost push inflation. I would argue it's a bigger risk because normal inflationary measures such as increasing interest rates have less of a controlling affect. Increasing rates won't stop inflation that's led by cost rises. People will simply get into more and more debt until we risk large numbers of people going bankrupt. It's going to be a tough few years I think. Time to batten down the hatches and avoid spending money on toys. This may well lead to stagflation.
 
mid_gen said:
Yes it's still money spent, but it's not increased demand, which is the mechanism that drives price inflation in this hypothetical wage/inflation death spiral.

Demand will be decreasing, as people cut back their expenditure, on both necessities, and discretionary spending.
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You need to make it clear then, as what you were saying is people have less money to spend, when they have the same money to spend, just on different things that they'd prefer to not spend it on.

Also I think the OP's question of the start of the spiral is just that, is this the start? You have inflation which is then countered with pay rises, thus putting people back at the status quo (or at least some people), then you prices rise again, and you get more pay rises. This is the first large inflationary increase and we are yet to see how many people get real world pay increases to counter act that over the next 12 months. So I'd think twice before writing it off, as it could last a good few years at this rate.
 
Journey said:
You need to make it clear then, as what you were saying is people have less money to spend, when they have the same money to spend, just on different things that they'd prefer to not spend it on.

Also I think the OP's question of the start of the spiral is just that, is this the start? You have inflation which is then countered with pay rises, thus putting people back at the status quo (or at least some people), then you prices rise again, and you get more pay rises. This is the first large inflationary increase and we are yet to see how many people get real world pay increases to counter act that over the next 12 months. So I'd think twice before writing it off, as it could last a good few years at this rate.
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Well, just think about it.

Energy and food prices aren't going up because people have more money to spend on electricity and gas and petrol and food. It's not being caused by wage inflation. It's not being caused by QE.

If significant portions of the population were getting real-terms pay increases, there might be some possibility of that causing some knock-on price inflation. But nobody is.
 
Oh, so its fine for banks to do QE for years
Its fine for companies to raise prices, can't lose those profits
Energy price increases purely from political decisions, fine

Workers asking for wages, not for increase, just to keep up with inflation - DEATH SPIRAL!
 
alec said:
Oh, so its fine for banks to do QE for years
Its fine for companies to raise prices, can't lose those profits
Energy price increases purely from political decisions, fine

Workers asking for wages, not for increase, just to keep up with inflation - DEATH SPIRAL!
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Congrats on not reading my OP and moving straight to rage posting. I specifically said this isnt a thread about who deserves pay increases and what percantage, this is about the theory that with high inflation comes higher and more frequent wage demands which can trigger even higher inflation.
 
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