I've got to admit the chart below surprised me at first. Employee wages and salaries (blue line) are rising faster than headline inflation (red line): 11.20% vs. 9.1% - I thought the opposite was happening. Sure, it's a narrow statistic for employee total compensation, but it is still significant, particularly since this is the fastest increase since the late 1970s.
On a second reading of the situation, rising wages and salaries must be what is driving inflation: people have a lot more money to spend, despite rising prices for basic necessities like gas, electric and food.
Seems to me that a jobs-destroying recession may indeed be in the cards, if inflation is to be tamed.
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Compensation of Employees And Inflation
cool man!... thanks for that data-point.... never thought it could happen... =)
ReplyDeletebtw, looking at the graph, it seems like the +ve reading for employee compensation is large because of the large negative in 2020... if we subtract that out, it might be a wash...
Deletealso, because more people are employed, individual incomes may actually be below inflation.
chicken
At the start of the pandemic wages and salaries dropped $1 trillion, and then immediately bounced back by $2.8 trillion, rising far above 2019 levels. H.
Delete… and you are right, individual wages are not rising as fast as inflation - but prices (inflation) are determined by total demand. Or, more accurately, marginal demand - but you get my point. :)
Deleteyeah... going by that graph,.. total wages have been increasing much faster than inflation for most of the last 10 years... but yes, individual income is clearly not doing so...
Deleteyou know, I think core inflation is the wrong model... what drives inflation today is asset price... stocks go up... then home price go up... the rent go up... then finally wage go up... truly, as you say... the tail is wagging the dog...