• Sat. Jul 13th, 2024

Shifting from “greed-flation” to “wage-flation

Jul 17, 2023

Rising wages are currently replacing corporate greed as the establishment’s primary scapegoat for inflation. However, this excuse is losing its effectiveness. Central banks have been using profits and wages as scapegoats for the inflation they cause, diverting blame away from themselves. Over the past two years, establishment politicians have primarily targeted profits, the so-called “greed-flation.” Now, the focus is shifting to wage inflation, with the Wall Street Journal expressing concern that it may hinder efforts to curb the inflation they caused.

While product shortages, accounting quirks, and lack of investment have contributed to the inflation, wages are now gradually increasing as workers claim a higher share of corporate value. Labor costs have risen by 6% in the past year, just barely outpacing the 5.3% inflation rate. In contrast, profits have only grown by 1.6%, which is a significant decline after adjusting for inflation.

The Journal attributes the current situation to labor shortages, but in reality, there are underlying issues related to the distribution of inflationary effects. The concept of “cantillon” inflation explains how the first recipients of newly printed money benefit the most, while the last recipients suffer losses as prices rise. Workers are finally feeling the effects of this “drip-down” inflation, which has eroded their real wages by nearly 8% since Biden took office.

The shift from “greed-flation” to “wage-flation” is simply a manifestation of the cantillon process, where trillions of dollars start with the federal government, then flow to banks, corporations, and finally to workers. The median American worker has been hit hard, losing nearly 8% of their wages, with the prospect of recovering this loss becoming increasingly uncertain.

The impending recession will likely exacerbate the situation, leading to wage cuts and job losses. Even gig work is replacing full-time jobs, further impacting workers’ economic stability. It seems unlikely that the lost real wages of the past few years will be fully recovered, as government intervention and economic manipulations continue to shape the economic landscape.

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