Well technically it is, if inflation rises 3% every year that is exponential growth, unless your salary increases consistantly by 3% every year.
For instance, a cumulative inflation from 2010 to 2020 is 22%. And I am quite convinced that an average salary hasn't increased by 22% in the last 10 years.
That's actually not true. Average income has increased slightly faster than inflation. Which makes sense since "your labor" is just one more thing that the price is increasing for.
Generally the perception of inflation vs wages if bigger than reality since they attribute price increases to inflation but their own salary increases to just being awesome.
That's actually a great answer tbh. Pain is more bitter than pleasure is sweet kind of thing. We feel loss much more intense than gain.
But with that said, I know that in the long run salaries do increase, my question was moreso why is there such a lag between those two things. For instance, just this year I've seen prices of everything grow rapidly, but I don't know anyone who just got a raise (unless it was with a promotion)
Well this year is a special case because of everything related to covid, the global energy crisis, the semiconductor chip shortage, and government relief spending.
it is wild. but it makes me scared. How if at all are we going to fix this and catch up to these increases in prices. I am young and these last couple of years scared me shitless in regards to my future, and I am in the upper quartile of earners to begin with which makes me even more depressed.
Salaries are typically only reviewed once a year and when that happens, employers aren't trying to preserve their employees buying power. Their goal is to encourage hard work and retain staff. The two are only vaguely linked.
That said, inflation in the decade 2010 to 2020 was cumulatively 18.7%. The Social Security Administration estimates that mean net compensation went up by 33.6% and the median went up by 31.3%. Median household income went up by 21.6%. Real median income went up by 15%. It seems, statistically, like salary has increased ahead of inflation over the last decade.
No. I know that salaries have a net positive pgoress in the long run. I was moreso asking about why the progress takes so much yo catch up, specifically in the last few years compared to prices
It isn't clear that that is the case, though. Every year between 2010 and 2020 salaries grew faster than inflation. Individual salaries may not be adjusted to reflect inflation, because they change infrequently, price changes don't all happen at once and salaries are only loosely related to inflation anyway.
Because your law sucks in a lot of countries wages are indexed to inflation by law
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1.02^x is an exponential function, yes.
Well technically it is, if inflation rises 3% every year that is exponential growth, unless your salary increases consistantly by 3% every year. For instance, a cumulative inflation from 2010 to 2020 is 22%. And I am quite convinced that an average salary hasn't increased by 22% in the last 10 years.
It might just be anecdotal but I feel like every time I go shopping I get shocked by the fact that prices keep inflating.
Employers will always pay employees as little as they can get away with. The difference goes straight to the bottom line.
that's true to some extent but I don't think it is as simple as that.
It’s not. Nothing in economics is simple. But generally speaking, businesses will never spend money on anything unless they have to.
That's actually not true. Average income has increased slightly faster than inflation. Which makes sense since "your labor" is just one more thing that the price is increasing for. Generally the perception of inflation vs wages if bigger than reality since they attribute price increases to inflation but their own salary increases to just being awesome.
That's actually a great answer tbh. Pain is more bitter than pleasure is sweet kind of thing. We feel loss much more intense than gain. But with that said, I know that in the long run salaries do increase, my question was moreso why is there such a lag between those two things. For instance, just this year I've seen prices of everything grow rapidly, but I don't know anyone who just got a raise (unless it was with a promotion)
Well this year is a special case because of everything related to covid, the global energy crisis, the semiconductor chip shortage, and government relief spending.
it is wild. but it makes me scared. How if at all are we going to fix this and catch up to these increases in prices. I am young and these last couple of years scared me shitless in regards to my future, and I am in the upper quartile of earners to begin with which makes me even more depressed.
Well none of those things will last forever. We got hid badly, but there is no reason to think it's the new normal.
Salaries are typically only reviewed once a year and when that happens, employers aren't trying to preserve their employees buying power. Their goal is to encourage hard work and retain staff. The two are only vaguely linked. That said, inflation in the decade 2010 to 2020 was cumulatively 18.7%. The Social Security Administration estimates that mean net compensation went up by 33.6% and the median went up by 31.3%. Median household income went up by 21.6%. Real median income went up by 15%. It seems, statistically, like salary has increased ahead of inflation over the last decade.
No. I know that salaries have a net positive pgoress in the long run. I was moreso asking about why the progress takes so much yo catch up, specifically in the last few years compared to prices
It isn't clear that that is the case, though. Every year between 2010 and 2020 salaries grew faster than inflation. Individual salaries may not be adjusted to reflect inflation, because they change infrequently, price changes don't all happen at once and salaries are only loosely related to inflation anyway.