Is Corporate Greed Causing Inflation?

In reply to Beer Baron 🍺 :

That is a key point, the employer makes the investment in tools/training/technology so why shouldn't they reap the rewards?

When it comes to training, it adds value to the employee, so should the employee have to reimburse the company if they leave? Typically no, but that training, experience, and knowledge gained during their tenure stays with the employee, and that may allow the employee to go someplace else to earn more in the future. 

Snowdoggie (Forum Supporter) said:

Doing well by working hard and getting better at what you do is a good thing.

Doing well by bribing government officials in order to fix the game in your favor is something else entirely.

It is also most definitely NOT capitalism, despite what so many people seem to believe.

Tom_Spangler (Forum Supporter) said:

[...]  Unions gained power in the 20s and 30s and drastically improved those things, then the war and the GI Bill, ushering in that "golden era" that we reference where someone with little or no education could get a factory job that would allow them to buy a house and 2 cars, send their kids to college, etc.

[...]  Anyhow, my point is: What if that 30-year period was the anomaly?  My point being that the "good old days" of the postwar period were never going to be sustainable once this country had to start competing on a global basis.

Let's also not overlook that towards the end of that 30-year period, many unions became the cure that was worse than the disease.  Between 1965 and 1980, the big industrial unions came damn close to beating the goose to death trying to force golden eggs out of it.

I'm not fundamentally anti-union and I support workers' rights to unionize (or not), but that pendulum swung too far the other way.

Beer Baron 🍺 said:

This is showing that workers have provided increased value to their employers, but have not gotten paid any more for providing more value.

[...]

The argument isn't that wages should have continued to rise at the same postwar rate, but that they should have risen closer to the rate of productivity.

But not all of that increased productivity came from workers just working harder.

Quite a bit of it came from increased technology and automation allowing workers to be more productive with no change in effort on their part.

Why should that part of the productivity increase be reflected in worker pay?  It was the employer that made that investment.

Worker pay comes down to one thing. 

How much does it cost to replace you. 

maschinenbau said:

In reply to Tom_Spangler (Forum Supporter) :

In the scheme of human history, the American experiment is maybe 1%. Quite anomalous indeed.  I appreciate the conversation. It's a very compelling argument. 

Has "middle class buying power" actually declined since your defined "golden era"? Because I can talk into a magic cigarette-lighter-sized box and it will change my fridge temperature from a country away. No one was powerful enough to buy that in 1975. As I argued previously, I think we are just buying different things now that are incomparable to things of the past, even things that served the same purpose like housing and transportation. And overall I think we're able to buy more for the amount of work we put in. 

This still screams "hidden value" to me and I can't see how it makes any economic sense. So a hard drive you could've bought in 1975 that was the size of a washing machine and cost as much as a car has now been surpassed by orders of magnitude in every way by a MicroSD card from a dollar store. But the MicroSD takes way less labor and materials to build than the ancient hard drive. It's mass produced in giant sheets with designs that were partially automated in a CAD program instead of painstakingly drawn out on sheets of paper and then hand-assembled out of largely low-volume fabricated parts. So if it takes less labor and materials to build and the result is a cheaper product, why is it worth any more than what's on the price tag? The fact that it would've been much more valuable if we could time-travel it into the past doesn't make it more valuable now. Anyone can buy those. They don't give you a competitive advantage like they would if you could take them back in time. A lot of these things have become basic necessities to participate in the economy, like the smartphone.

It's mostly the same with cars and partly the same with houses. Less labor with both, less material with cars but more with housing. They do the exact same things. My grandmother used to live in a WW1-era house that appeared to have been retrofitted with electricity, and it didn't work too differently to other houses in the '90s, the insulation was kinda crappy and the floors were off-level in a lot of places but it wasn't an apples and oranges difference. There's no way a modern house the same size should be worth 2x more - and with the neighborhood that house was in, it ended up appreciating by far more than that.

I think we're absolutely not able to buy more overall for the amount of work we put in now, even if we can buy a ultra-powerful pocket computer instead of a tabletop radio that would've cost similar money because they took roughly similar amounts of labor and material to make in their time. If you focus on electronic gadgets alone, yeah that may be true, but if you bring housing and education into the picture and compare them to today's wages, we're all worse off on average. You need to house-hunt for the right house in the right city to get anything like a '70s housing deal, that's not an average purchase, that's a highly optimized outlier.

Duke said:

Beer Baron 🍺 said:

This is showing that workers have provided increased value to their employers, but have not gotten paid any more for providing more value.

[...]

The argument isn't that wages should have continued to rise at the same postwar rate, but that they should have risen closer to the rate of productivity.

But not all of that increased productivity came from workers just working harder.

Quite a bit of it came from increased technology and automation allowing workers to be more productive with no change in effort on their part.

Why should that part of the productivity increase be reflected in worker pay?  It was the employer that made that investment.

I've heard this argument before. A couple of reasons are that technology and automation tend to intensify the work and make it more mentally taxing. Those should be worth something.

Another more practical consideration is that if we assume that all the productivity increase should go toward the owners of the capital that paid for technology, that gets us exactly where we are now, decades into a stagnant worker pay trend with runaway returns for the owners of capital. Not a healthy trend for society or the economy as demand concentrates.

36yo, single earner household of four here, no college degree, no certificate. Also happen to live in an expensive area. Average home costs in the area are $475k and rising. I also have poor impulse control and not great spending habits. We've had regular trips to Disney for the last few years. We live better than any of the previous generations in either family.
 

They're digging out for our footings next week. We didn't buy the bare minimum. We didn't buy a fixer. We didn't buy in a bad part of town. We didn't buy out in the boonies 20 miles out of town. We bought new, close to things, with more space than we need. 
 

Im a parts guy. I did it. Things are difficult. Things have always been difficult. But in four months I'll have my own garage AND a spare room for my hobbies. My kids will have their own rooms, and my wife will have a new house. There's a lot of discouragement out there. Don't let it in. 

In reply to GameboyRMH :

Maybe I'm missing your point, but it sure seems like you're writing off all human progress as this "hidden value".

250 years ago most people worked a lot harder than they do now, but could only afford the barest of minimums for food, shelter, and clothing, let alone luxuries of any kind.

In reply to Duke :

Yeah that's a reasonable way of putting it. Or to look at it another way, I don't think human progress is any excuse for worsening inequality.

People probably didn't work that hard 250 years ago either: https://www.reuters.com/article/idUSBRE97S0KV/

In reply to GameboyRMH :

I mean, when we all lived in caves, income equality was probably better... but was life better because of that?

In reply to maschinenbau :

Has "middle class buying power" actually declined since your defined "golden era"? Because I can talk into a magic cigarette-lighter-sized box and it will change my fridge temperature from a country away. No one was powerful enough to buy that in 1975. As I argued previously, I think we are just buying different things now that are incomparable to things of the past, even things that served the same purpose like housing and transportation.

This is why it is so difficult to compare prosperity of different time periods. It's easy to plug numbers into inflation calculators and try to make a comparison based on dollars, but much more difficult when you try to drill down and see what those figures actually represented in the real world. You can't buy equivalents to most goods from decades past today. Not only would they not sell, but many things would not even be allowed to be built the way they were back then. That's why houses are such a horrible example of inflation. It's not all inflation, it's largely that a 1975 house and a 2024 house are different products. You would not be allowed to build a 1975 house today, and permits and fees alone today cost more than the 1975 house did in total. Before I bought my current house a few years ago, I looked into building one. It was prohibitably expensive vs. buying an existing home.  
 

This thread is focused on corporate greed. But what about consumer greed? Isn't that just as much a driver of inflation? If people want a good bad enough that they are willing to pay inflated prices to get it (assuming this isn't discretionary spending) then aren't they also contributing to inflation?

 And overall I think we're able to buy more for the amount of work we put in. 

This. Money is just a convenient method of trading labor, goods, or anything else of value. While the amount of goods purchased per dollar has shrunk, the amount of work gone into earning that dollar has also shrunk. I'd wager that the gap between wages and productivity that people keep linking mimics the increase in standard of living that we enjoy. It kind of has too. Our increase in standard of living is largely the result of increased productivity per unit of work. The assumption of those posting the graph is that the companies keep it all. I present that competition necessitates that much of it is passed onto the consumer, hence the higher standard of living.

Duke said:

In reply to GameboyRMH :

I mean, when we all lived in caves, income equality was probably better... but was life better because of that?

I'm contending that they're two separate issues that need not be conflated. We've had low tech and high inequality in the past, low tech and low inequality, and more recently fairly high tech and fairly low inequality. Inequality isn't a tradeoff we have to accept to get something in return. It's just its own problem to be solved.

In reply to GameboyRMH :

Duke said:

Beer Baron 🍺 said:

This is showing that workers have provided increased value to their employers, but have not gotten paid any more for providing more value.

[...]

The argument isn't that wages should have continued to rise at the same postwar rate, but that they should have risen closer to the rate of productivity.

But not all of that increased productivity came from workers just working harder.

Quite a bit of it came from increased technology and automation allowing workers to be more productive with no change in effort on their part.

Why should that part of the productivity increase be reflected in worker pay?  It was the employer that made that investment.

I've heard this argument before. A couple of reasons are that technology and automation tend to intensify the work and make it more mentally taxing. Those should be worth something.

Another more practical consideration is that if we assume that all the productivity increase should go toward the owners of the capital that paid for technology, that gets us exactly where we are now, decades into a stagnant worker pay trend with runaway returns for the owners of capital. Not a healthy trend for society or the economy as demand concentrates.
 

When I read your post, a random childhood memory popped in my head. I remembered watching an episode of "The Jetson's." George was complaining how hard his job was. His job was to push a button. It struck me as a child that he was complaining about what most people at the time (70's or 80's?) saw as an easy job. But I guess life imitates art, and it's not as far fetched today as it was when the show aired. Thanks to this powerful computer in my pocket, that I find of great value, it took me 10 seconds to find a 40 year old memory...

This one is pretty good too...

It's just human nature I guess, which is a good thing. It's why we weren't all content just to live in caves. But there should be a balance between wanting more and appreciating what you have. 
 

I do think I'm on to something though, with increased productivity being passed on to the general population, but it's not always in the form of higher pay. It may not always be dollars in your pocket, but it is value that everyone enjoys. If I could snap my fingers and change it to 1975, not many people would be happy with the changes. I'd also wager that many of the same people who struggle in 2024 would have also struggled in 1975. 

Toyman! said:

Worker pay comes down to one thing. 

How much does it cost to replace you. 

 

That's the theory.

In practice, we have people running restaurants complaining that nobody wants to work anymore, and then you find their help wanted ad stating that they pay $2.15/hour plus tips.

Low unemployment means that if you want to fill a position, you need to compete not just with other people looking to hire, but with other people's employees.  And human inertia means that you have to really, really outbid in order to entice someone away from where they are already established.  Will I jump jobs for $1/hr more? Probably not.  $10/hr more? Maybe.

This is why the rich owners don't LIKE a strong economy.  They are more powerful and can increase their bottom line if the economy is weak and unemployment is up.

I got to hear all about this from my cousin who manages a restaurant.  When 2020 happened, a LOT of parents told their teenage kids to not go to work.  So she lost a lot of employees and they were scrambling.  And she found that she could give herself an easy raise by going to a different restaurant... and then another... etc.  It was a game of musical chairs with more chairs than people and the chair owners desperate to get someone in their chair.

barefootcyborg5000 said:

36yo, single earner household of four here, no college degree, no certificate. Also happen to live in an expensive area. Average home costs in the area are $475k and rising. I also have poor impulse control and not great spending habits. We've had regular trips to Disney for the last few years. We live better than any of the previous generations in either family.
 

They're digging out for our footings next week. We didn't buy the bare minimum. We didn't buy a fixer. We didn't buy in a bad part of town. We didn't buy out in the boonies 20 miles out of town. We bought new, close to things, with more space than we need. 
 

Im a parts guy. I did it. Things are difficult. Things have always been difficult. But in four months I'll have my own garage AND a spare room for my hobbies. My kids will have their own rooms, and my wife will have a new house. There's a lot of discouragement out there. Don't let it in. 

^^^This ^^^  All of this.  I'm toasting you right now for seeing the opportunity where others see the negatives. 

It wasn't easy when we did it, I was scared E36 M3less to be honest.  I'm sure others in my age group have very similar stories.  I put pretty much everything I had saved towards a down payment on our house a year before we got married and had roughly $800.00 left in the bank after the closing.  In the middle of what at the time was the biggest recession we'd had in many years.  We were both on the same page, worked hard and were fortunate that it all worked out. 

Good for you and your family, keep it up! 10 years from now you'll be glad you took the risk.

I occasionally feel envious (I wish I was tall like that person, I wish I was athletic like that other person, etc.) and when I do I always ask myself if I'd be willing to roll the dice on my genetic code...would I be willing to gamble the good code I received (health, a mind that supports marketable skills, etc.) in exchange for the opportunity to get an even better genetic code overall.

I always answer no to that question which indicates that I believe I got a better than average roll overall.

So, if things are actually bad today, one should be happy to roll the dice on being born at a different time.

Would you roll those dice?

In reply to RX Reven' :

What kind of time range are we talking about? If there's a good chance of hitting the late '30s to early/mid '80s birthday jackpot range I'd be strongly inclined to roll the dice. Heck, at this point I might be willing to take my chances with the Great Depression, apparently it only lasted 10 years. I've been at one job longer than that, while a 10-year economic slump was happening in the background, coincidentally. This Great Recession to Rolling Forever Trainwreck that I've been living through has exceeded 16 years so far.

In reply to GameboyRMH :

First, can we all please take a moment to acknowledge and celebrate the awesomeness of GRM...we're on page six of an inherently contentious subject and yet we've all managed to play nice; amazing!!!

 My friend, in my opinion (please feel free to disagree), rolling the dice implies pure randomness (i.e. no constraints).  Of course, we could weight the odds to be proportional to population sizes at various points in time or we could come up with some other weighting scheme.

I proposed a simple thought experiment, are you OK with letting it just be that?

Toyman! said:

Worker pay comes down to one thing. 

How much does it cost to replace you. 

More generally (and as with everything else in economics), it comes down to supply and demand.  How rare are your skills, and how much do other people want those skills?  Cost to replace is just a specific instance of that.

In reply to codrus (Forum Supporter) :

Correct. If you are a widget installer who is easily replaced by anyone off the street then the supply is large and the pay is generally small. 

If you are a neurosurgeon with 20 years of experience then you can probably demand a slightly higher salary. 

So, back to the original topic. 

Are companies giving out raises based on the inflation numbers? 

Should they? 

Or should they try to get prices back down to pre-inflationary numbers by keeping their costs down? 

Duke said:

In reply to GameboyRMH :

I mean, when we all lived in caves, income equality was probably better... but was life better because of that?

Said differently: A rising tide lifts all boats. I don't care that there are billionaires that I am less equal to compared to 200 years ago, because we have it much better now than in the past. That is true for the vast majority of humans alive today. That is true even compared to 50 years ago, especially if you're not a white straight cis male. Sure it could always be better, and I hope things keep getting better, but as a human being it's a damn good time to be alive. Enjoy the ride.

maschinenbau said:

Duke said:

In reply to GameboyRMH :

I mean, when we all lived in caves, income equality was probably better... but was life better because of that?

Said differently: A rising tide lifts all boats. I don't care that there are billionaires that I am less equal to compared to 200 years ago, because we have it much better now than in the past. That is true for the vast majority of humans alive today. That is true even compared to 50 years ago, especially if you're not a white straight cis male. Sure it could always be better, and I hope things keep getting better, but as a human being it's a damn good time to be alive. Enjoy the ride.

Amen! 

maschinenbau said:

Duke said:

In reply to GameboyRMH :

I mean, when we all lived in caves, income equality was probably better... but was life better because of that?

Said differently: A rising tide lifts all boats. I don't care that there are billionaires that I am less equal to compared to 200 years ago, because we have it much better now than in the past. That is true for the vast majority of humans alive today. That is true even compared to 50 years ago, especially if you're not a white straight cis male. Sure it could always be better, and I hope things keep getting better, but as a human being it's a damn good time to be alive. Enjoy the ride.

I got a healthy dose of this sentiment when I was canning strawberry jam (and syrup) last year.  I wanted to see if I could do a pectin free recipe.  There were plenty out there and I chose one that looked like it would work (at least in my experience). 

While canning I realized that in a single day, a single row of strawberries was filling my family's yearly requirement of strawberry jam and syrup (we consume about a jar of jam or a bottle of syrup a month and rotate in other berry preserves, but I digress).  Yet, if I took that to market and tried to sell it, then I wouldn't even break $100...

Seemed unfair to me.  You need to eat, right?  This should be worth somethin!

One week later, we lost the entire batch.  Every last bottle and jar grew white fuzz and turned.

Go back $250 years, and that jam probably WAS worth something.  But losing that batch was probably a lot more devastating for ye-average-farmer back then too... 

These days it's just a hobby.  Losing the batch means I go pay $5 a month for strawberry jam from the local Tesco.