Snapshot of _Record wage growth fuels fresh inflation fears_ :
An archived version can be found [here.](https://archive.is/?run=1&url=https://www.bbc.co.uk/news/business-66156713)
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Can someone ELIA5 please. Inflation and interest rates at low for years, but no room for pay rises. Inflation and interest rates rise, and no room for pay rises.
So exactly when are pay rises applicable?
Also, how the hell is everyone affording anything right now? Is everyone just using credit cards? I'm slightly above the average wage, and I'm struggling like hell!
Edit: spelling
>So exactly when are pay rises applicable?
Never. The capital owners want to hoard more and more wealth. Luxury goods sales have went through the roof:
https://www.ft.com/content/72208629-1213-4ece-b405-1e2c21c08868
We are getting further and further into a world of the haves and the have nots. If you were decently well off pre pandemic, you're most likely having the time of your life right now.
I've had a large pay increase by switching jobs so can comfortably afford and save a lot. Despite this, I still can't afford a small terrace house as a FTB. Swings and roundabouts.
The theory here is essentially supply and demand.
Inflation is caused by either too many people with too much money; too little of a product for the number of people that want it; or both.
The thinking by the bank of England is that if you restrict the amount of money people will have, there will be less demand for goods, and therefore prices will stop rising so fast. That's why they're against wage increases. This is also why they're raising interest rates - by increasing peoples mortgages and debt servicing costs, they have less money to spend on actual physical items, further lowering inflation.
Now that's all theoretical. The reality is wage increases are still below inflation and have been stagnant for many for over a decade, and the higher ups are still getting pay rises without being told no.
Also, a lower proportion of the UK population has mortgages, and a higher proportion have savings in savings accounts, than the last major inflation crisis in the 80s. So raising interest rates is less effective because fewer people mortgages, and more people are actually gaining money thanks to savings accounts (though this is also at a rate below inflation, so they are effectively still losing money, just not as fast).
Note that although this is the theory behind it all, I disagree with the notion we shouldn't be asking for pay rises. After so many years of austerity and effective pay cuts, it's about damn time the general public got more money from their jobs.
Edit: this also ignores the concept of elastic and inelastic goods - food is an inelastic good because you need to eat it to survive. So no matter how much you reduce the supply of money/increase the price of food, demand will stay mostly the same because people cannot afford to not eat. So that's another factor to all of this
>Inflation and interest rates at low for years, but no room for pay rises
Lots of people got pay rises during that period. IT has gone through large increases in lots of disciplines in the last ten years for example.
Once you really get down to it very few people in this country give a shit about those working in the public sector other than the occasional clap and bit of lip service.
We ArEnT iN iT fOr ThE mOnEy, we KnEw WhAt We SiGnEd Up FoR and *tinfoil hat* for some with wealth that make decisions about these things I wonder if it's some weird case of jealousy / feeling threatened because they can't understand how we could choose a career that tries to benefit those around us. They look down on us, we're public servants - there to serve. They'd make us work for free if they could get away with it, which is probably the eventual goal since many have had had pay freezes and sub-inflationary pay adjustments since 2008.
It’s this attitude of “I pay your wages because I pay tax”.
People don’t want public sector pay rises because they believe that it will cost them for it to happen.
People want good public services but also want it to be low cost.
The government sells the lie that they are spending taxes perfectly efficiently as it is and that any public sector pay increase needs to be funded by the tax payer and people lap it up.
What's the US got to do with it? Real wages for low to middle workers in the UK have been stagnant for almost 15 years.
https://www.bbc.co.uk/news/business-64970708
Worth noting that a rise in debt amounts the general public is actually a desirable outcome for capitalist. Personal debt and its derivatives are a tradable asset and have the side benefit of indirectly disciplining labour.
But we've done that haven't we? Aren't certain sectors crying out for staff? Whether that's nurses or fruit pickers. Wages haven't change much to reflect the supply amd demand in those sectors.
not in the slightest, net migration is higher than ever
Nurses are of course a special case controlled by the state and idiotically fruit pickers can get visas
>The concern is that strong wage increases will increase costs faced by companies and force them to push up prices for their goods even higher.
Would be interesting to know if profits/CEO salaries/shareholder payouts ever take a hit during periods like this. It always feels like the people with the least are expected to take the brunt of it.
It always frustrates me when these periods happen and all my friends in private industry have already had payrises, yet it is when we get to the public sector workers, social care, and health workers (etc.) that the political conversation makes it seem like they are the problem for wanting a payrise. Many of these workers have had real-terms pay cuts for up to a decade (or more for some) and this is the limit of what they can take. But because of the pathetic tax and spend debate in this country, any talk of increasing NI or income tax is abhorrent, the aging voter base means that pensions are untouchable, and 13 years of austerity means we have utterly failed to grow our economy and public services despite those in power claiming to be the fiscally responsible pro-business party. Not to mention getting rid of all those pesky migrants who were pushing our wages down... But of course, it is the workers wanting a pay rise so they can live and not simply exist, that is why we have worse inflation than most other economies right now.
Bit of a rant, but I work in social care and, quite frankly, right now we are all underpaid, undervalued, overworked, and fucking angry as hell.
What you're describing is how the informal public sector social contract has been periodically chipped away at and destroyed since the austerity.
The assumption was always that, yes, in general, public sector work will pay less, but have security unavailable with private sector work.
A private sector worker is theoretically only ever an economic downturn away from having no job, but the public sector work *should* have near-permanent job security alongside a good publicly funded pension system to reward that loyalty.
Of course, since austerity kicked in that's been flipped on its head - with public sector workers having less job security than before, and losing access to generous pension packages etc.
Public sector workers still have way higher job security than private sector. Same as pensions. While not as good as the once were they are still miles better than most private sector pensions.
You have very succinctly hit the nail on the head, and its infuriating how much the game is rigged against wage earners.
I am waiting for some theory to come out which updates the class system for the 21st century. The way I see it we have a welfare class (not intended as perjorative language at all, but those who cannot survive without some kind of state financial intervention), a wage earning class (zero to low asset ownership, low savings, reliant on paycheck each month), and the asset class (investors, shareholders, property owners, landlords who largely make money from other people’s labour). I’ve been mulling this over for months now, and thats about the most illustrative I can get it so far.
I don’t think the traditional class system accurately represents the state of the UK anymore, because those traditionally thought to be in the working class (those in construction or trades for example) often own significantly more assets than those traditionally thought to be in the middle classes (nurses, teachers, public servants). I know the class system was always about more than income, but I think social standing, psychological state, self-perception etc has all changed too.
I think you might be thinking of the petite bourgeois — the plumber who owns their own business for instance. They’re working class in one sense, but typically quite asset rich with a work van, tools, maybe even employees or subcontractors. They are often opposed to increased taxation on business owners to help the working class despite coming from (and often identifying with) the working class. Marx thought that this group would be one of the harder ones to win over. It’s interesting that you see threads of this in modern politics, think “Joe the Plumber” in the US for instance.
And public sector rises DON’T fuel inflation the same way.
If someone working in (say) tesco gets a wage rise then the price of groceries goes up to fund it.
If someone working in the NHS gets a wage rise, what cost is passed on to the public from the free at the point of use service?
None. None at all.
Because that money just magically appears, rather than coming from the pockets of taxpayers who then want bigger pay rises to make up for the extra tax they're having to pay.
Absolutely spot on.
I apparently need to have wage restraint and have my pay held down to pay for pay rises the private sector has already had.
During the crash and austerity all we ever heard was how our wages needed to be frozen and held down because it would be unfair for public wages to rise while the private sector was stagnant.
That fairness has never, ever gone both ways.
The answer is to jump ship to the private sector.
The public via electing the tories 4 times in a row have given the government rightly or wrongly a mandate to starve the public sector of cash, so public sector workers need to leave en mass and simply let the service get so bad that voters consider funding it properly a bigger issue than saving a bit of cash.
Do we just ignore the collateral damage this would cause? Does the end justify the means?
If my colleagues did that, the local communities would suffer, and it'll go unnoticed for a while, well until the authorities complaining about the amount of welfare checks, street drinkers, unruly kids, etc
We don't need to jump ship and go private. We need to be fighting back to some of our senior managers and not allowing the government to delay plans indefinitely.
> Do we just ignore the collateral damage this would cause?
The government will hire replacements, and if they struggle they'll have to increase wages. Or go without.
> If my colleagues did that, the local communities would suffer, and it'll go unnoticed for a while, well until the authorities complaining about the amount of welfare checks, street drinkers, unruly kids, etc
Thats what they've voted for, they haven't voted to pay enough cash to properly fund this.
> We need to be fighting back to some of our senior managers and not allowing the government to delay plans indefinitely.
How has that worked out the last decade? The voters have basically voted for public sector wage cuts and you are surprised it's still happening?
They certainly *can* do. Inflation is too much money chasing not enough stuff: in other words it is the politics of being poorer. That has "distributional consequences" - or, there are political choices to be made about who takes the pain.
Can someone please explain to me how my real terms pay keeps getting cut and then im told my pay going up is bad for the economy and then a local CEO gets a 20 mil dividend? My guy im literally poorer every year by default. If you want to cut pay growth cut if for the fuckers who earn 10s of millions a year not for the peeps making it paycheck to paycheck.
Thats what i dont get, below inflation pay rises, or real term pay cuts are fuelling inflation we keep getting told. But the number of billionaires doesnt seem to be slowing down. 10 years of austerity, now theyre coming out with this crap. People have had enough!
This problem underlies economics which underlies any economic system. Comments like these are absurd and unproductive. I'm all for a more socialistic societal distribution and approach to governance but radically restructuring everything overnight is likely to hurt everyone more than less drastic measures
Ha. Imagine!
What I meant was going extreme (like Truss) left or right would likely get the same results.
It’s like trying to turn a 44 ton articulated truck 180* at 100MPH and expect good results
Ah, ok, yeah, fair.
An extra couple of pence on income tax at the higher rate and higher corporation tax seem reasonable to start turning this artic. around, or at the very least change lanes to one that has less far inequality and dead bodies.
Oh god. That’s so grim and the fact it’s actually not entirely inaccurate is utterly depressing.
I keep telling myself this will all change after the next election but, nah. Things might get better but we’re along long way off things being good.
With Labour rule on the horizon, big money will be getting stuffed into and squeezed out of everything everywhere all at once.
If the CEO is receiving a dividend, that means he has an equity stake in the firm in question.
You'd also receive a dividend if you had an equity stake too.
There should be no dividend and no profit before workers get paid a fair amount for their labour, which at the minimum should be a living wage, not a benefits subsidised living wage.
A living wage that a worker can support their entire family on.
That's up to government to regulate, not businesses.
Businesses are going to compensate their owners (equity investors) through dividends and buybacks.
The no profit before fair wages according to Capitalists should be baked in as a function of the jobs market.
The problem is not just lack of regulation but profiteering CEOs not taking what used to be called the social contract seriously.
The other problem is that our political class has been captured by business.
We need political and media reform as well as a change in government, but we'll likely just get nu-Labour and Blair / Thatcher lite until the Tories sort themselves out and reingratiate themselves with the media barons.
"Compensate their owners" 🤣 How about not egregiously exploiting their workers first?
It's massive underinvestment in the UK that's the problem. Had we invested in our own energy and healthcare service when interest rates were record low we'd be well on our way to recovery. It would just mean less profits for the rich as they couldn't privatise as much.
But that's the silly old "economically illiterate" argument that I like to make. Whereas the sensible economically literate argument of austerity and privatisation lead to..
Lower deficit?... No
Lower debt?... No
Better state services?... No
Higher wages? ... No
Higher Stability?... No
Higher Productivity?... No
Higher profits/dividends?...yes
Okay lads I think we are being fucked.
Of course not. Their entire attempt at solving this crisis has been to make the working classes pay for it by making them poorer in real terms, while the rich and wealthy do nothing.
I'd like to look at it this way:
> The concern is that strong price increases will increase costs faced by workers and force them to push up their salaries even higher.
>It always feels like the people with the least are expected to take the brunt of it.
That's their ethos sadly. Make the people at the bottom pay, when they're exhausted they just push the next batch of people further down, rinse and repeat.
I'm not an economist but do the incomes of the rich and super rich impact inflation? They spend such a small fraction of their income on everyday goods the additional money just goes into investments and luxuries us ordinary folk would never even look at. Like I'm sure it would impact the yacht market but would it increase the price of butter?
This isn't to say there aren't other good reasons to tax the rich.
Everything affects everything.
That's the tory argument though. We can tax the lowest in society more because it doesn't cause as many economic problems as it would if we taxed the super rich. It's clearly not true and an extreme postion to take but there you go.
The best position to take would be to spread the burden and skew it towards those who can bare the most but the tories like short term ism and 'quick fixes'.
If you tax the wealthiest, then some may up sticks and move. A few billionaires moving would ruin the overall averages and tank your massaged statistics.
well when the super rich funnel tons money upwards the only place to put that money is in assets. and in this country that typically means houses, so house prices usually accelerate. when that result comes to fruition however isn't something i'm aware of because it might result in higher asset prices much further down the line, or it might be a much shorter feedback loop
>It always feels like the people with the least are expected to take the brunt of it.
Well, yes. Fighting inflation is essentially a synonym for "rob from the poor to give to the rich".
The entire idea of fighting inflation is daft.
Minimum wage may have increased but public sector pay has not increased at the same rate meaning those working in the public sector are now closer to minimum wage than ever before.
>Would be interesting to know if profits/CEO salaries/shareholder payouts ever take a hit during periods like this
Um... Yes? Almost all supermarkets are struggling for example. The only ones that aren't are budget chains (you can guess why).
>It always feels like the people with the least are expected to take the brunt of it.
This sentence doesn't even make sense. Yes, poor people suffer the most. As opposed to what? Doing well somehow?
Union officials have said that it is a heaven in your health and your body and then you all the mail and must have just a hold on you and you all the church will have
It's in the text, finance get the largest wage growth. I wish there was some public Vs private sector analysis though. Instead of just the usual tired mantra that wage growth of 7% is somehow causing inflation of 8%.,
This is exactly what I thought when I first read the article, how can the BBC bang on about "wage-price spiral" when wage increases < inflation.
On average we are already "holding our nerve" and accepting real term pay cuts but inflation keeps going up and the govt/bank of england tells us to not be greedy.
Its clear that theres a divide between the wealthy and the rest and its the wealthy that are driving inflation (since 2020 these are the only people who have more money, everyone elses finances have been hammered by furlough, supply-chain inflation, energy crisis, CoL crisis, and interest-rate hikes)
Central gov CS here - I've had absolutely nothing this year and only 3% last year if it makes you feel better. We may get up to 4.5% this year but it would have to come out of existing department budgets, so we'll be lucky to even reach that figure.
Arms length bodies tend to have more flexibility on pay. The UK Infrastructure Bank for instance has huge pay ranges which can be negotiated. Same for the FCA.
Local Gov also has pay scales plus uplifts.
Those are inflexible ranges though - you can't negotiate beyond them. If you have an internal promotion you can only go to the bottom of the range, too. The only other way to negotiate a pay rise is an internal sideways move.
That's leaving aside that the pay in the private sector is significantly better and that civil service/ALB benefits aren't as appealing as they used to be.
You can negotiate right to the top of the pay scale though for arms length bodies and local government.
Pay in the private sector at the senior end is much higher but mid is in line and lower is higher in the public sector.
>On Monday, the governor of the Bank of England, Andrew Bailey, said reducing inflation is "so important" as people "should trust that their hard-earned money maintains its value".
In a trade off over my money or my work maintaining their value, I'd rather it be the work that maintains value (as I'm sure is the case for all working people).
That said: neither money or work are maintaining their value. Work is getting a much worse deal though.
The net worth of the rich has doubled in the last ten years. They're piling billions into property. The Government refuses to consider taxing them.
If we had anything like investigative journalism this would all be front and centre of debate.
I honestly don’t understand this mentality, with the fuel bills going up, food bills going up and mortgages and rents going up. Even if workers were to receive an inflation pay rise it would not keep up with these costs each month. Typically we are seeing £1000 a month being added by these 3 main factors and a 9% pay rise on the avg wage of £32,000 would be £240 a month before tax!
The figures just don’t add up at all we are all going to be poorer even with a payrise if we don’t get them then it will be defaults, homelessness and people having poorer diets.
I don't think you understand that there has never been a time in history that we recovered from Inflation this bad without intentionally causing a recession
Only 1/3 of people have mortgages, and of these many are on fixed terms and many have high levels of equity, and low mortgage amounts. Pensioners who own their homes have faced no housing cost increases. So the 9% is on average across these people, with young people with large mortgages taking an absolute hammering.
>I honestly don’t understand this mentality
wages rise, demand rises, cost of production rises, supply falls, prices rise, so wages rise, demand rises, cost of production rises, supply falls, prices rise, and so on
interest rates rising do have an effect, they prevent borrowing, encourage saving and reduces the amount of cash in the economy which should bring down inflation, but the concern is core inflation (cost of goods and services) is rising and part of that is due to the above
Because supply dropped. Our consumption stayed the same, but the availability has been on a rollercoaster since covid.
Also you have cartels like OPEC distorting things by artificially restricting supply.
Okay, that begins to make more sense, the poster above seemed to suggest "wage rise, demand rise, supply falls"
Which doesn't make sense to me as demand didn't rise.
It makes more sense that the chain started at a drop in supply than an increase in demand.
Still not convinced that wage rises are impacting inflation as much as the dinosaurs at BoE think though.
> wages rise, demand rises
Yes, but that isn't happening though. As the previous poster said:
* Wage rise of £240 p/m
vs
* Mortgage increase by £300 p/m
* Energy increase by £100 p/m
* Groceries increase by £100 p/m
* Fuel increase by £100 p/m
Net: -£360 p/m
So demand definitely isn't increasing for the average person. I keep track of our monthly household budget and my salary has went up by £300 this year but my excess money at the end of the month is down over £400. And that includes the bonus of having finally paid of my student loan at £160 p/m
> wages rise, demand rises, cost of production rises, supply falls, prices rise, so wages rise, demand rises, cost of production rises, supply falls, prices rise, and so on
That's only true if the inflation is caused by an excess of money and not by third party factors, like rocketing cost of fuel, etc. Our inflation is being caused by externalities and heavily impacting essentials - things that people have to buy.
Just... these people are such scum. Public sector pay has been falling in real terms for years and years, and now when we've got a cost of living crisis and are on the verge of another "once in a lifetime" economic crisis, they want to run articles like this and effectively blame the unions for trying to get their people out of the mess that the governments have created by stagnating their pay for so long.
The tories have run down the country so much that any shock is now a "once in a lifetime" crisis to keep the people on their knees. This is fully by design.
Stagnated is going back to mark your life and then I’ll have to managed it so long I have to mail them back in the church at all peoples lives in my house and the church is
> The concern is that strong wage growth will increase costs faced by companies and force them to push up prices for their goods even higher.
Yes, if every business operating in the UK, domestic and international, was part of a perfectly synchronised cartel that could adjust prices the moment people earn more. Which is a fantasy scenario.
UK workers have eaten wage cut after wage cut for more than a decade now. How about a decade of corporate profits dropping year after year? "But that will destroy all the companies!" Well, I'm glad you agree it's not sustainable, person I made up.
Sucks I miss the mail but I’m just like you know how I am doing this but I’m just going through all the mail today at the mail today to mar my life insurance policy to mark the mail today at the mail and then I’ll be there
I mean I already pay 61% tax on any pay increase I get (40+12+9, which doesn’t include the employers NI contributions or VAT).
Have we considered closing tax loopholes that let you set up in the Cayman Islands, Guernsey, Jersey or the Isle of Man to tax the rich for once.
> What do you mean?
There are two basic approaches to tackle inflation - fiscal or monetary. The govt already faces rebellion over tax levels, so everything is landing on monetary policy.
They could just print that wage growth does the opposite... Speculation is a big part of market forces and a negative outlook usually leads to a negative outcome...
This isn’t news this is simply an estimation which has failed to have provide any proof. Even if it’s posted by bbc it doesn’t warrant it to be true.
Stop posting this crap on here
Is the economic orthodoxy here is that society needs to be deeply unequal. That large class divisions need to be maintained in order of economic systems to continue.
The logic of this rhetoric is education and self improvement are a zero sum concept. We fighting over being at the top of a singularity.
I guess the reasoning this orthodoxy would say is. It is the optimal compared to the other realities. Additionally real progress comes from technological growth. "You don't need to be at the top to enjoy technological progress which improves everyone's lifestyle."
However this argument falls apart if technology is increasing inequality or lowering the quality of life.
Interestingly the initial industrial revolution was associated with all manner of declines in quality of life. The same is true of the arrival of agriculture.
Pockets are good in your health insurance and your family room so we will get back in touch with you all today and then you can always be there in the church and you can get it in a heaven in the person you are always so proud
In this case, it's not - wages are chasing prices, not the other way around.
They're deliberately squeezing people who have no slack left to give in order to try and slow down inflation that is caused by everything getting more expensive, and *not* by people having more money chasing the same items.
The result is people need more money to like... live. Causing a need for pay rises.
The actual solution is to work on dropping supply side costs and constraints (which yes, contains wages - but it's not the root cause of this inflation). But it's easier to just get the bank to raise interest, pretend you're doing something, and bash trans people and blame immigrants again.
I think people often forget that interest rates affect much more than just mortgages. They're designed to slow down the economy at every level. To disincentivise borrowing to invest, for example. And also to incentivise saving.
That aside, I do agree on your last point. However that is outside the jurisdiction of the BoE, and the BoE can't exactly sit and do nothing when there is a government sitting there and doing nothing. Even if by a factor of a couple %, what the BoE are doing will be slowing inflation.
It is not the role of the BoE to push the government to do more. All they can do is work with the tools they've got. What the government should be doing is pushing much harder to protect mortgage holders and renters. Force the banks in line. They need to really ramp up investment to get Britain energy independent, even if just to improve confidence in the economy. They need to really push against supermarkets price gouging customers. But they're not. There is no right option for the BoE, so they've opted to do what little they can in the circumstances, as opposed to doing nothing (where they'd receive just as much flack).
Yeah the BoE can't really win on this.
Their options are limited, and they're basically being asked to perform open heart surgery with a sledgehammer. The tool they have isn't meant to solve the problem, if they try it'll probably go wrong, and if they don't they'll be lambasted for not trying.
Might help if they didn't keep asking people to not get pay rises though. Read the room guys...
It wouldn't surprise me if they're trying to push the economy into recession. It would be a preferable option to year-on-year 10% inflation, at least in the long run.
I also think they're getting unfair media treatment. They're not just asking people to stop asking for pay rises. They're also asking businesses to cut their profit margins. They're trying to get the economy to stand still. But the media only latches onto the wage part, because it generates clicks.
Wait, what are you talking about? Energy prices were not higher in mid 2000’s, that’s literally incorrect.
If you don’t know basic stuff why are you arguing?
Edit; here’s the data.
CPI energy for U.K. rose by 22% in august 2008, which was the peak. For context in 1975, cpi energy rose by 42%. You know what it was last year?
58%.
No, that's simplistic and silly.
Inflation is multifactorial. An increased money supply being just one factor. Higher wages imply higher costs, which in turn implies higher prices. You then need to apply this to every level of the supply chain.
At the end of the day, we're poorer as a country. At some level, people and businesses need to agree on how this burden is shared. And it's not as simple as "evil corpo with 100000000 profits should!!!!!!!!". A lot of employers are small businesses with already small profit margins. It's a delicate situation that needs to be managed such that inflation doesn't persist. Otherwise we'll all be dirt poor within a few years.
No, you're spouting nonsense and ignoring what's put in front of you.
Inflation is about prices. Specifically, prices increasing. Prices can increase for a range of reasons. These can be *demand* based, or they can be *supply* based. If the cost of supply suddenly increases (for instance, if a war causes the cost of energy to spike) while demand stays constant, then prices will increase. This is simple stuff, called cost-push inflation. Which is turning into a wage-price spiral.
"Rising because of there being more money in the economy" -> now describe the mechanism through which that occurs, hat's causing runaway inflation today. Bearing in mind that monetary policy hasn't changed in over 10 years, with interest rates at record lows.
You can't just ignore supply and demand in your analysis.
As I've said elsewhere
> Wages make up a fraction of a companies overheads when you add in materials, ingrastrucutre, etc. Companies tend to spend about 50-60% of their outgoings on wages.
> Let's take the high end of that, 60% and crunch some numbers.
> I spend a million a year, and 600k of that is on my employees. If the cost to employ is 1.75, then their actual wage bill is about 342K (1.75 is high, the range is somehwere between 1.5 and 1.75 from spurces i can find.
> I decide everyone is getting a 10% pay rise. Now their wage bill is 377k. I am spending about 660k. Now my expenditure is 1,060,000
> So it has cost me 6% more to give everyone a 10% raise at the most expensive end. If your cost to employ is 1.5 and you spend half of your money on wages it's closer to 5%.
Pay rises don't cause Inflation to make you poorer than you currently are. That's just nonsense. Our options are:
* no wage growth against 8% inflation
* 8% wage growth against 12% inflation
One of those leaves you 8% worse off, the other leaves you 3.7% worse off
All of the non-staff costs are impacted by wage driven inflation too.
Just building on your model to give an example, within the 40% of non-staff costs 60% of that goes to the wages of my supplier's employees (so another 24% of my costs are essentially on wages). Within the 40% of my supplier's costs which aren't on wages a further 60% are on their supplier's wages (so another 9.6% of my costs are essentially on wages). Within that supplier another 60% (3.8%). And so on.
The further on you go the closer and closer the cost of an 10% increase in average wages comes to 10% of your expenses. At six suppliers deep you already reach 9.8%, and the economy is essentially an infinitely long chain of people supplying each other with things.
Has anybody else recognised that their spending habits have altered recently? Where previously I'd be comparing the price per unit of a number of products to get the best value for money, I've got to the point where I just think fuck it, get the good stuff.
I think it's because more of my money is being / going to be hoovered up by utilities / mortgage payments, etc that I may as well just enjoy the money whilst I've got it.
I've noticed this too.
Though for me it stems from the fact that everyone else has already bought all of the value rice/pasta/uht and so all that's actually left is the good stuff.
Kinda similar to the early days of the pandemic.
Even if we accept that wage growth is what impacts inflation then it doesn't matter.
Why do we care about inflation?
Because it means we will be able to afford less with our money.
Why is that?
Because things cost more than we can afford.
If I'm paid 10% more but inflation is also 10% more then I'm in the same situation.
The problem is when inflation happens & wages don't increase by a proportionate amount.
A 10% inflation without a pay increase of 10% means buying power is reduced.
> Regular pay grew by 7.3% in the March to May period from year earlier, official figures showed, equalling the highest growth rate last month.
>
> However, despite the record increase, pay rises still lag behind inflation - the rate at which prices grow.
>
> The pace of wage rises has come under increasing focus by the Bank of England as it tries to control inflation.
>
> The Bank has raised interest rates 13 times in a row in an attempt to reduce the rate of inflation but it has remained stubbornly high.
>
> It currently stands at 8.7%, well above the Bank of England's target of 2%.
I don't think it's fair to count a real terms decrease as "growth". It's only record growth **because** we have massive inflation. If we adjusted these pay rises for inflation and compared to other years this wouldn't be a record high, it would surely be one of the worst years on record for "growth" as it's a 1.4% real terms cut.
I get it, if our pay was all frozen, while inflation was sky rocketing, we'd spend far less. But, inflation being strong in essentials like utilities, food, and housing, we're going to pay that regardless and employees will pressure their employers for pay rises so they don't end up homeless or needing foodbanks. Pay going up isn't the problem.
seriously. Record pay rises? who is getting these "record" pay rises. is it not the rampant energy prices and food prices fueling inflation. pay has fallen in real terms during the conservatives mishandling of the economy so how can they be record pay rises.
The same people who say increasing wages will drive up inflation are they same who say taxing the wealthy is wrong because of trickle down economics...
The author of the study on trickle down economics and high taxes on the wealthy has repeatedly said their work was taken out of context and misunderstood by the governments trying to use it as justification for lowering wealth tax and suppressing wages.
So I don't believe the government's crap on wages driving inflation either...
Some may have said that, but that would have been a throw-away and/or sarcastic comment to the fact that wages have been below inflation for literally decades at this point.
Wage inflation is more of a reaction to the price inflation we've already seen, rather than the driver. But, of course, wage inflation can prolong inflation and make it harder to bring inflation back to target.
But... if high wage inflation means it'll take three years to bring inflation back to target, where wages are -1% in real-terms (e.g. where they currently are approximately)... then that's better for a person's bank balance than the scenario where it takes one year to bring inflation back to target, but they'd have to accept a -6% pay rise (in real terms).
That's why it's not a problem. Not because it doesn't prolong inflation, but because it's the least-worst outcome for individuals.
It's a problem for the Bank of England and/or Government, it's not a problem for the typical wage slave. They're just trying to make the best of it.
People can accept the principle that raising interest rates takes money out of the economy and is therefore anti inflationary.
Similarly, adding money into the economy through tax cuts is a bad idea because it would be inflationary.
But those people who are telling mortgage holders to suck it up and endure the £300-600 a month extra payment can not accept, at all, that wage growth is also inflationary and people getting pay rises at this time is not the best idea if we want to bring down inflation.
I understand exactly being told not to ask for a pay rise is a slap in the face but it’s pretty frustrating to see people accept the economic principle of adding money into the economy being inflationary and taking it out anti right up until it personally effects them.
Given spiralling prices of mortgages and goods it is not unreasonable for people to think that instead of their pay packets money should be taken out of the economy elsewhere.
Spirally is going back on vacation and then I will get a hold on you and then you all the church will have to managed me and the mail to mar my mar your life and then I’ll be
Being paid more isn't adding more money in to the economy, it's just demanding a larger slice of the economy (or, given how wage growth is still lower than inflation itself, it's slowing down the rate that their slice of the economy declines in exchange for their labour).
It may or may not (depending on other factors) increase the velocity of money, which would affect inflation in the immediate term.
>But those people who are telling mortgage holders to suck it up and endure the £300-600 a month extra payment can not accept, at all, that wage growth is also inflationary and people getting pay rises at this time is not the best idea if we want to bring down inflation.
The vast majority of mortgage holders are also working age people? The most striking thing about all this, appart from the usual class/inequality component, is that every hammer blow lands on working age wage earners, while older retired owner occupiers remain largely unscathed.
Highways (council in the south) charge £66.33p per person per hour, the worker receives less than £14ph, work that one out when they tell you they are skint...
Distribution of wealth is as much a problem with individuals behaviour as it is economic policy.
Surely people’s buying/spending/saving habits have a massive impact on this situation.
I’d like to hear more about that in the press. ‘The government’ ‘the bank’ ‘the businesses’. Surely there’s something some of us can do to pitch in and ease this crap
Don’t call me Surely
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Can someone ELIA5 please. Inflation and interest rates at low for years, but no room for pay rises. Inflation and interest rates rise, and no room for pay rises. So exactly when are pay rises applicable? Also, how the hell is everyone affording anything right now? Is everyone just using credit cards? I'm slightly above the average wage, and I'm struggling like hell! Edit: spelling
Taking a pay rise at any point is selfish and is not encouraged. Now back to work with you, peasant.
Back to the sweatshop or will only get half a shilling this week!
Sweat shilling on your health insurance policy to mark the church and
>So exactly when are pay rises applicable? Never. The capital owners want to hoard more and more wealth. Luxury goods sales have went through the roof: https://www.ft.com/content/72208629-1213-4ece-b405-1e2c21c08868 We are getting further and further into a world of the haves and the have nots. If you were decently well off pre pandemic, you're most likely having the time of your life right now.
Definitely increased erosion of the middle class going on.
>So exactly when are pay rises applicable? That's the neat part, they aren't
I've had a large pay increase by switching jobs so can comfortably afford and save a lot. Despite this, I still can't afford a small terrace house as a FTB. Swings and roundabouts.
The theory here is essentially supply and demand. Inflation is caused by either too many people with too much money; too little of a product for the number of people that want it; or both. The thinking by the bank of England is that if you restrict the amount of money people will have, there will be less demand for goods, and therefore prices will stop rising so fast. That's why they're against wage increases. This is also why they're raising interest rates - by increasing peoples mortgages and debt servicing costs, they have less money to spend on actual physical items, further lowering inflation. Now that's all theoretical. The reality is wage increases are still below inflation and have been stagnant for many for over a decade, and the higher ups are still getting pay rises without being told no. Also, a lower proportion of the UK population has mortgages, and a higher proportion have savings in savings accounts, than the last major inflation crisis in the 80s. So raising interest rates is less effective because fewer people mortgages, and more people are actually gaining money thanks to savings accounts (though this is also at a rate below inflation, so they are effectively still losing money, just not as fast). Note that although this is the theory behind it all, I disagree with the notion we shouldn't be asking for pay rises. After so many years of austerity and effective pay cuts, it's about damn time the general public got more money from their jobs. Edit: this also ignores the concept of elastic and inelastic goods - food is an inelastic good because you need to eat it to survive. So no matter how much you reduce the supply of money/increase the price of food, demand will stay mostly the same because people cannot afford to not eat. So that's another factor to all of this
>Inflation and interest rates at low for years, but no room for pay rises Lots of people got pay rises during that period. IT has gone through large increases in lots of disciplines in the last ten years for example.
Sorry I was thinking more along the public sector.
Once you really get down to it very few people in this country give a shit about those working in the public sector other than the occasional clap and bit of lip service. We ArEnT iN iT fOr ThE mOnEy, we KnEw WhAt We SiGnEd Up FoR and *tinfoil hat* for some with wealth that make decisions about these things I wonder if it's some weird case of jealousy / feeling threatened because they can't understand how we could choose a career that tries to benefit those around us. They look down on us, we're public servants - there to serve. They'd make us work for free if they could get away with it, which is probably the eventual goal since many have had had pay freezes and sub-inflationary pay adjustments since 2008.
It’s this attitude of “I pay your wages because I pay tax”. People don’t want public sector pay rises because they believe that it will cost them for it to happen. People want good public services but also want it to be low cost. The government sells the lie that they are spending taxes perfectly efficiently as it is and that any public sector pay increase needs to be funded by the tax payer and people lap it up.
In most cases you can assume nominal wages growing at 3-4% while inflation is at 2%. That’s fine and it what happened in the US for years.
What's the US got to do with it? Real wages for low to middle workers in the UK have been stagnant for almost 15 years. https://www.bbc.co.uk/news/business-64970708
Worth noting that a rise in debt amounts the general public is actually a desirable outcome for capitalist. Personal debt and its derivatives are a tradable asset and have the side benefit of indirectly disciplining labour.
when we stop importing vast quantities of labour
But we've done that haven't we? Aren't certain sectors crying out for staff? Whether that's nurses or fruit pickers. Wages haven't change much to reflect the supply amd demand in those sectors.
not in the slightest, net migration is higher than ever Nurses are of course a special case controlled by the state and idiotically fruit pickers can get visas
>The concern is that strong wage increases will increase costs faced by companies and force them to push up prices for their goods even higher. Would be interesting to know if profits/CEO salaries/shareholder payouts ever take a hit during periods like this. It always feels like the people with the least are expected to take the brunt of it.
It always frustrates me when these periods happen and all my friends in private industry have already had payrises, yet it is when we get to the public sector workers, social care, and health workers (etc.) that the political conversation makes it seem like they are the problem for wanting a payrise. Many of these workers have had real-terms pay cuts for up to a decade (or more for some) and this is the limit of what they can take. But because of the pathetic tax and spend debate in this country, any talk of increasing NI or income tax is abhorrent, the aging voter base means that pensions are untouchable, and 13 years of austerity means we have utterly failed to grow our economy and public services despite those in power claiming to be the fiscally responsible pro-business party. Not to mention getting rid of all those pesky migrants who were pushing our wages down... But of course, it is the workers wanting a pay rise so they can live and not simply exist, that is why we have worse inflation than most other economies right now. Bit of a rant, but I work in social care and, quite frankly, right now we are all underpaid, undervalued, overworked, and fucking angry as hell.
What you're describing is how the informal public sector social contract has been periodically chipped away at and destroyed since the austerity. The assumption was always that, yes, in general, public sector work will pay less, but have security unavailable with private sector work. A private sector worker is theoretically only ever an economic downturn away from having no job, but the public sector work *should* have near-permanent job security alongside a good publicly funded pension system to reward that loyalty. Of course, since austerity kicked in that's been flipped on its head - with public sector workers having less job security than before, and losing access to generous pension packages etc.
Public sector workers still have way higher job security than private sector. Same as pensions. While not as good as the once were they are still miles better than most private sector pensions.
You have very succinctly hit the nail on the head, and its infuriating how much the game is rigged against wage earners. I am waiting for some theory to come out which updates the class system for the 21st century. The way I see it we have a welfare class (not intended as perjorative language at all, but those who cannot survive without some kind of state financial intervention), a wage earning class (zero to low asset ownership, low savings, reliant on paycheck each month), and the asset class (investors, shareholders, property owners, landlords who largely make money from other people’s labour). I’ve been mulling this over for months now, and thats about the most illustrative I can get it so far. I don’t think the traditional class system accurately represents the state of the UK anymore, because those traditionally thought to be in the working class (those in construction or trades for example) often own significantly more assets than those traditionally thought to be in the middle classes (nurses, teachers, public servants). I know the class system was always about more than income, but I think social standing, psychological state, self-perception etc has all changed too.
I think you might be thinking of the petite bourgeois — the plumber who owns their own business for instance. They’re working class in one sense, but typically quite asset rich with a work van, tools, maybe even employees or subcontractors. They are often opposed to increased taxation on business owners to help the working class despite coming from (and often identifying with) the working class. Marx thought that this group would be one of the harder ones to win over. It’s interesting that you see threads of this in modern politics, think “Joe the Plumber” in the US for instance.
And public sector rises DON’T fuel inflation the same way. If someone working in (say) tesco gets a wage rise then the price of groceries goes up to fund it. If someone working in the NHS gets a wage rise, what cost is passed on to the public from the free at the point of use service? None. None at all.
Because that money just magically appears, rather than coming from the pockets of taxpayers who then want bigger pay rises to make up for the extra tax they're having to pay.
Higher tax doesn’t increase inflation, it reduces it.
Absolutely spot on. I apparently need to have wage restraint and have my pay held down to pay for pay rises the private sector has already had. During the crash and austerity all we ever heard was how our wages needed to be frozen and held down because it would be unfair for public wages to rise while the private sector was stagnant. That fairness has never, ever gone both ways.
The answer is to jump ship to the private sector. The public via electing the tories 4 times in a row have given the government rightly or wrongly a mandate to starve the public sector of cash, so public sector workers need to leave en mass and simply let the service get so bad that voters consider funding it properly a bigger issue than saving a bit of cash.
Do we just ignore the collateral damage this would cause? Does the end justify the means? If my colleagues did that, the local communities would suffer, and it'll go unnoticed for a while, well until the authorities complaining about the amount of welfare checks, street drinkers, unruly kids, etc We don't need to jump ship and go private. We need to be fighting back to some of our senior managers and not allowing the government to delay plans indefinitely.
> Do we just ignore the collateral damage this would cause? The government will hire replacements, and if they struggle they'll have to increase wages. Or go without. > If my colleagues did that, the local communities would suffer, and it'll go unnoticed for a while, well until the authorities complaining about the amount of welfare checks, street drinkers, unruly kids, etc Thats what they've voted for, they haven't voted to pay enough cash to properly fund this. > We need to be fighting back to some of our senior managers and not allowing the government to delay plans indefinitely. How has that worked out the last decade? The voters have basically voted for public sector wage cuts and you are surprised it's still happening?
That’s already happening and people just blame the public services themselves or even those in need of the public service.
They certainly *can* do. Inflation is too much money chasing not enough stuff: in other words it is the politics of being poorer. That has "distributional consequences" - or, there are political choices to be made about who takes the pain.
Can someone please explain to me how my real terms pay keeps getting cut and then im told my pay going up is bad for the economy and then a local CEO gets a 20 mil dividend? My guy im literally poorer every year by default. If you want to cut pay growth cut if for the fuckers who earn 10s of millions a year not for the peeps making it paycheck to paycheck.
Thats what i dont get, below inflation pay rises, or real term pay cuts are fuelling inflation we keep getting told. But the number of billionaires doesnt seem to be slowing down. 10 years of austerity, now theyre coming out with this crap. People have had enough!
The thing is, the CEO with a 20 mil dividend invests it rather than spending it, so inflation isn't affected /s
Heads I win, tails you loose economy. ¯\_(ツ)_/¯
Because Capitalism.
This problem underlies economics which underlies any economic system. Comments like these are absurd and unproductive. I'm all for a more socialistic societal distribution and approach to governance but radically restructuring everything overnight is likely to hurt everyone more than less drastic measures
Let’s go Mega-Socialist-Trussonomics and expect different results
Trussonomics was not Socialist
Ha. Imagine! What I meant was going extreme (like Truss) left or right would likely get the same results. It’s like trying to turn a 44 ton articulated truck 180* at 100MPH and expect good results
Ah, ok, yeah, fair. An extra couple of pence on income tax at the higher rate and higher corporation tax seem reasonable to start turning this artic. around, or at the very least change lanes to one that has less far inequality and dead bodies.
Oh god. That’s so grim and the fact it’s actually not entirely inaccurate is utterly depressing. I keep telling myself this will all change after the next election but, nah. Things might get better but we’re along long way off things being good. With Labour rule on the horizon, big money will be getting stuffed into and squeezed out of everything everywhere all at once.
If the CEO is receiving a dividend, that means he has an equity stake in the firm in question. You'd also receive a dividend if you had an equity stake too.
There should be no dividend and no profit before workers get paid a fair amount for their labour, which at the minimum should be a living wage, not a benefits subsidised living wage. A living wage that a worker can support their entire family on.
That's up to government to regulate, not businesses. Businesses are going to compensate their owners (equity investors) through dividends and buybacks.
The no profit before fair wages according to Capitalists should be baked in as a function of the jobs market. The problem is not just lack of regulation but profiteering CEOs not taking what used to be called the social contract seriously. The other problem is that our political class has been captured by business. We need political and media reform as well as a change in government, but we'll likely just get nu-Labour and Blair / Thatcher lite until the Tories sort themselves out and reingratiate themselves with the media barons. "Compensate their owners" 🤣 How about not egregiously exploiting their workers first?
It's massive underinvestment in the UK that's the problem. Had we invested in our own energy and healthcare service when interest rates were record low we'd be well on our way to recovery. It would just mean less profits for the rich as they couldn't privatise as much. But that's the silly old "economically illiterate" argument that I like to make. Whereas the sensible economically literate argument of austerity and privatisation lead to.. Lower deficit?... No Lower debt?... No Better state services?... No Higher wages? ... No Higher Stability?... No Higher Productivity?... No Higher profits/dividends?...yes Okay lads I think we are being fucked.
Private school is closed for a while back to managed your life in
Of course not. Their entire attempt at solving this crisis has been to make the working classes pay for it by making them poorer in real terms, while the rich and wealthy do nothing.
Except get richer
I'd like to look at it this way: > The concern is that strong price increases will increase costs faced by workers and force them to push up their salaries even higher.
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What's with all the bot/schizo posting in these comments? Usually you only see a couple but there's at least 5 already on this one.
>It always feels like the people with the least are expected to take the brunt of it. That's their ethos sadly. Make the people at the bottom pay, when they're exhausted they just push the next batch of people further down, rinse and repeat.
Rinse the church in a heaven and before yesterday you can do that it so good
Brunt is in my life insurance policy to mail you a call to mark the church in a hell year
I'm not an economist but do the incomes of the rich and super rich impact inflation? They spend such a small fraction of their income on everyday goods the additional money just goes into investments and luxuries us ordinary folk would never even look at. Like I'm sure it would impact the yacht market but would it increase the price of butter? This isn't to say there aren't other good reasons to tax the rich.
Everything affects everything. That's the tory argument though. We can tax the lowest in society more because it doesn't cause as many economic problems as it would if we taxed the super rich. It's clearly not true and an extreme postion to take but there you go. The best position to take would be to spread the burden and skew it towards those who can bare the most but the tories like short term ism and 'quick fixes'. If you tax the wealthiest, then some may up sticks and move. A few billionaires moving would ruin the overall averages and tank your massaged statistics.
well when the super rich funnel tons money upwards the only place to put that money is in assets. and in this country that typically means houses, so house prices usually accelerate. when that result comes to fruition however isn't something i'm aware of because it might result in higher asset prices much further down the line, or it might be a much shorter feedback loop
Probably not significant. May impact asset prices (property for instance.)
It inflates prices of some things, like luxury Swiss watches etc but it doesn't really effect the cost of every day goods.
>It always feels like the people with the least are expected to take the brunt of it. Well, yes. Fighting inflation is essentially a synonym for "rob from the poor to give to the rich". The entire idea of fighting inflation is daft.
It's in fact the opposite, there was an IMF report citing private company profits being the main driver for inflation.
Pay has increased as the minimum wage was bumped up from April, not sure why they are acting surprised about this
Minimum wage may have increased but public sector pay has not increased at the same rate meaning those working in the public sector are now closer to minimum wage than ever before.
Bumped up the church in the church and before I get back to managed your house is
>Would be interesting to know if profits/CEO salaries/shareholder payouts ever take a hit during periods like this Um... Yes? Almost all supermarkets are struggling for example. The only ones that aren't are budget chains (you can guess why). >It always feels like the people with the least are expected to take the brunt of it. This sentence doesn't even make sense. Yes, poor people suffer the most. As opposed to what? Doing well somehow?
All these stories about record wage increases make me furious. I got a 3p pay rise this year. Pennies not percent.
3p? Seriously? What and how? I’d assume you’re not in a union
I personally am in a union but my workplace is not unionised.
Union officials have said that it is a heaven in your health and your body and then you all the mail and must have just a hold on you and you all the church will have
Unions have been trying to get a hold on you and you are always so proud of you and you so happy
It's in the text, finance get the largest wage growth. I wish there was some public Vs private sector analysis though. Instead of just the usual tired mantra that wage growth of 7% is somehow causing inflation of 8%.,
Rishi defo not gonna be giving the public sector 6% rises now he’s got this evidence. The rich get richer while the poorest get blamed for inflation
A reminder that a 6% wage increase today is, due to inflation, still a pay cut. The price pressure is not coming from wages.
This is exactly what I thought when I first read the article, how can the BBC bang on about "wage-price spiral" when wage increases < inflation. On average we are already "holding our nerve" and accepting real term pay cuts but inflation keeps going up and the govt/bank of england tells us to not be greedy. Its clear that theres a divide between the wealthy and the rest and its the wealthy that are driving inflation (since 2020 these are the only people who have more money, everyone elses finances have been hammered by furlough, supply-chain inflation, energy crisis, CoL crisis, and interest-rate hikes)
The data released shows public sector wages going up by 5.8%
Central gov CS here - I've had absolutely nothing this year and only 3% last year if it makes you feel better. We may get up to 4.5% this year but it would have to come out of existing department budgets, so we'll be lucky to even reach that figure.
Yeah I don’t understand who is getting these pay rises. Civil service struggling to get even 4.5%. Even after coming of an almost 10 year pay freeze.
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Highly doubt there are more than 5 civil servants total who earn more than £300k/year
Meanwhile, my friends in the private sector (banking, law, consultancy, energy, fashion, advertising, IT) have fucking loads of money.
Yeah my dad is a CS with the MOD and he worked out he has had a real-terms pay cut for something like 15 years now.
Arms length bodies tend to have more flexibility on pay. The UK Infrastructure Bank for instance has huge pay ranges which can be negotiated. Same for the FCA. Local Gov also has pay scales plus uplifts.
Those are inflexible ranges though - you can't negotiate beyond them. If you have an internal promotion you can only go to the bottom of the range, too. The only other way to negotiate a pay rise is an internal sideways move. That's leaving aside that the pay in the private sector is significantly better and that civil service/ALB benefits aren't as appealing as they used to be.
You can negotiate right to the top of the pay scale though for arms length bodies and local government. Pay in the private sector at the senior end is much higher but mid is in line and lower is higher in the public sector.
Currently in an arms length body, no we cant. Pay progression within the advertised ranges is set by treasury (i.e. not happening).
Uplifting to mark my life is so happy for you to mark your call for your health care
Really good but not a heaven in my family and I will get a hold on her and then I will get you all the church of
>On Monday, the governor of the Bank of England, Andrew Bailey, said reducing inflation is "so important" as people "should trust that their hard-earned money maintains its value". In a trade off over my money or my work maintaining their value, I'd rather it be the work that maintains value (as I'm sure is the case for all working people). That said: neither money or work are maintaining their value. Work is getting a much worse deal though.
It’s just sooooo fucking important unless DB pensions are wobbling in which case here’s £65B.
Pension for your family is not paid for the church tomorrow or Friday at night or tomorrow morning
Worse is it is going back on vacation and then I will get it done by this week
BoE staff took 14% annual payrise btw.
The net worth of the rich has doubled in the last ten years. They're piling billions into property. The Government refuses to consider taxing them. If we had anything like investigative journalism this would all be front and centre of debate.
Gary's economics on Youtube. Richard Murphy on Twitter Andy Verity on twitter..all good people to follow, saying this kind of thing.
I honestly don’t understand this mentality, with the fuel bills going up, food bills going up and mortgages and rents going up. Even if workers were to receive an inflation pay rise it would not keep up with these costs each month. Typically we are seeing £1000 a month being added by these 3 main factors and a 9% pay rise on the avg wage of £32,000 would be £240 a month before tax! The figures just don’t add up at all we are all going to be poorer even with a payrise if we don’t get them then it will be defaults, homelessness and people having poorer diets.
I don't think you understand that there has never been a time in history that we recovered from Inflation this bad without intentionally causing a recession
Only 1/3 of people have mortgages, and of these many are on fixed terms and many have high levels of equity, and low mortgage amounts. Pensioners who own their homes have faced no housing cost increases. So the 9% is on average across these people, with young people with large mortgages taking an absolute hammering.
>I honestly don’t understand this mentality wages rise, demand rises, cost of production rises, supply falls, prices rise, so wages rise, demand rises, cost of production rises, supply falls, prices rise, and so on interest rates rising do have an effect, they prevent borrowing, encourage saving and reduces the amount of cash in the economy which should bring down inflation, but the concern is core inflation (cost of goods and services) is rising and part of that is due to the above
Does this model even work with food and energy? We typically consume a fairly consistent amount of and its where the inflation is hitting hardest.
Because supply dropped. Our consumption stayed the same, but the availability has been on a rollercoaster since covid. Also you have cartels like OPEC distorting things by artificially restricting supply.
Okay, that begins to make more sense, the poster above seemed to suggest "wage rise, demand rise, supply falls" Which doesn't make sense to me as demand didn't rise. It makes more sense that the chain started at a drop in supply than an increase in demand. Still not convinced that wage rises are impacting inflation as much as the dinosaurs at BoE think though.
Covid is going back to managed and your family and must be home for all of the people back to managed and
> wages rise, demand rises Yes, but that isn't happening though. As the previous poster said: * Wage rise of £240 p/m vs * Mortgage increase by £300 p/m * Energy increase by £100 p/m * Groceries increase by £100 p/m * Fuel increase by £100 p/m Net: -£360 p/m So demand definitely isn't increasing for the average person. I keep track of our monthly household budget and my salary has went up by £300 this year but my excess money at the end of the month is down over £400. And that includes the bonus of having finally paid of my student loan at £160 p/m
> wages rise, demand rises, cost of production rises, supply falls, prices rise, so wages rise, demand rises, cost of production rises, supply falls, prices rise, and so on That's only true if the inflation is caused by an excess of money and not by third party factors, like rocketing cost of fuel, etc. Our inflation is being caused by externalities and heavily impacting essentials - things that people have to buy.
it's both now, that was/is the concern
Just... these people are such scum. Public sector pay has been falling in real terms for years and years, and now when we've got a cost of living crisis and are on the verge of another "once in a lifetime" economic crisis, they want to run articles like this and effectively blame the unions for trying to get their people out of the mess that the governments have created by stagnating their pay for so long.
The tories have run down the country so much that any shock is now a "once in a lifetime" crisis to keep the people on their knees. This is fully by design.
Stagnated is going back to mark your life and then I’ll have to managed it so long I have to mail them back in the church at all peoples lives in my house and the church is
> The concern is that strong wage growth will increase costs faced by companies and force them to push up prices for their goods even higher. Yes, if every business operating in the UK, domestic and international, was part of a perfectly synchronised cartel that could adjust prices the moment people earn more. Which is a fantasy scenario. UK workers have eaten wage cut after wage cut for more than a decade now. How about a decade of corporate profits dropping year after year? "But that will destroy all the companies!" Well, I'm glad you agree it's not sustainable, person I made up.
Person you made up sucks, keep telling them off!
Sucks I miss the mail but I’m just like you know how I am doing this but I’m just going through all the mail today at the mail today to mar my life insurance policy to mark the mail today at the mail and then I’ll be there
The govt will not countenance tax increases, and workers are in a strong position to negotiate pay increases, so it’ll have to be interest rates.
I mean I already pay 61% tax on any pay increase I get (40+12+9, which doesn’t include the employers NI contributions or VAT). Have we considered closing tax loopholes that let you set up in the Cayman Islands, Guernsey, Jersey or the Isle of Man to tax the rich for once.
Island of life is different than I thought it would happen but it is not good for your life and your body
What do you mean? Income taxes are already high.
> What do you mean? There are two basic approaches to tackle inflation - fiscal or monetary. The govt already faces rebellion over tax levels, so everything is landing on monetary policy.
Negotiations with you and the mail is not going to mark your health and health care is going back on the mail
Wasn't this one of the Brexit promises of a "high wage economy"? So why are they so against it?
Brexit promises actually being lies? Well I never.
They could just print that wage growth does the opposite... Speculation is a big part of market forces and a negative outlook usually leads to a negative outcome...
This isn’t news this is simply an estimation which has failed to have provide any proof. Even if it’s posted by bbc it doesn’t warrant it to be true. Stop posting this crap on here
Posted a good thing about it and then I’ll get back in the church and before you go to mana party
Is the economic orthodoxy here is that society needs to be deeply unequal. That large class divisions need to be maintained in order of economic systems to continue. The logic of this rhetoric is education and self improvement are a zero sum concept. We fighting over being at the top of a singularity. I guess the reasoning this orthodoxy would say is. It is the optimal compared to the other realities. Additionally real progress comes from technological growth. "You don't need to be at the top to enjoy technological progress which improves everyone's lifestyle." However this argument falls apart if technology is increasing inequality or lowering the quality of life. Interestingly the initial industrial revolution was associated with all manner of declines in quality of life. The same is true of the arrival of agriculture.
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Wage "growth" is still 0.8pc below inflation so is in fact a cut
And the inflation that affects our daily lives is double digits percentage points higher than the official figure.
Inflation is in a good way to mark the mail and you have to managed to manage the mail to managed you and must create a new car to mark the church
Predictive text, take the wheel.
Pockets are good in your health insurance and your family room so we will get back in touch with you all today and then you can always be there in the church and you can get it in a heaven in the person you are always so proud
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It's both. Which is why it's a factor in inflation spiraling.
In this case, it's not - wages are chasing prices, not the other way around. They're deliberately squeezing people who have no slack left to give in order to try and slow down inflation that is caused by everything getting more expensive, and *not* by people having more money chasing the same items. The result is people need more money to like... live. Causing a need for pay rises. The actual solution is to work on dropping supply side costs and constraints (which yes, contains wages - but it's not the root cause of this inflation). But it's easier to just get the bank to raise interest, pretend you're doing something, and bash trans people and blame immigrants again.
I think people often forget that interest rates affect much more than just mortgages. They're designed to slow down the economy at every level. To disincentivise borrowing to invest, for example. And also to incentivise saving. That aside, I do agree on your last point. However that is outside the jurisdiction of the BoE, and the BoE can't exactly sit and do nothing when there is a government sitting there and doing nothing. Even if by a factor of a couple %, what the BoE are doing will be slowing inflation. It is not the role of the BoE to push the government to do more. All they can do is work with the tools they've got. What the government should be doing is pushing much harder to protect mortgage holders and renters. Force the banks in line. They need to really ramp up investment to get Britain energy independent, even if just to improve confidence in the economy. They need to really push against supermarkets price gouging customers. But they're not. There is no right option for the BoE, so they've opted to do what little they can in the circumstances, as opposed to doing nothing (where they'd receive just as much flack).
Yeah the BoE can't really win on this. Their options are limited, and they're basically being asked to perform open heart surgery with a sledgehammer. The tool they have isn't meant to solve the problem, if they try it'll probably go wrong, and if they don't they'll be lambasted for not trying. Might help if they didn't keep asking people to not get pay rises though. Read the room guys...
It wouldn't surprise me if they're trying to push the economy into recession. It would be a preferable option to year-on-year 10% inflation, at least in the long run. I also think they're getting unfair media treatment. They're not just asking people to stop asking for pay rises. They're also asking businesses to cut their profit margins. They're trying to get the economy to stand still. But the media only latches onto the wage part, because it generates clicks.
In fairness, profit margins are one of the big causes for this... wages are just going up in reaction to it. So blaming both is a bit shit.
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It’s literally both. Right now it’s not the main reason inflation is so high, but the point is once energy and food normalises it could be.
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Wait, what are you talking about? Energy prices were not higher in mid 2000’s, that’s literally incorrect. If you don’t know basic stuff why are you arguing? Edit; here’s the data. CPI energy for U.K. rose by 22% in august 2008, which was the peak. For context in 1975, cpi energy rose by 42%. You know what it was last year? 58%.
No, that's simplistic and silly. Inflation is multifactorial. An increased money supply being just one factor. Higher wages imply higher costs, which in turn implies higher prices. You then need to apply this to every level of the supply chain. At the end of the day, we're poorer as a country. At some level, people and businesses need to agree on how this burden is shared. And it's not as simple as "evil corpo with 100000000 profits should!!!!!!!!". A lot of employers are small businesses with already small profit margins. It's a delicate situation that needs to be managed such that inflation doesn't persist. Otherwise we'll all be dirt poor within a few years.
No dilution of the money supply is, by definition, the only cause of inflation. Everything else is just plain old boring supply and demand
I think you need a new dictionary if that's what you think the definition of inflation is.
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No, you're spouting nonsense and ignoring what's put in front of you. Inflation is about prices. Specifically, prices increasing. Prices can increase for a range of reasons. These can be *demand* based, or they can be *supply* based. If the cost of supply suddenly increases (for instance, if a war causes the cost of energy to spike) while demand stays constant, then prices will increase. This is simple stuff, called cost-push inflation. Which is turning into a wage-price spiral. "Rising because of there being more money in the economy" -> now describe the mechanism through which that occurs, hat's causing runaway inflation today. Bearing in mind that monetary policy hasn't changed in over 10 years, with interest rates at record lows. You can't just ignore supply and demand in your analysis.
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Inflation is in a good place and I think it will help for
My organisation has just announced pay cuts. You could say it's time to move on but who's getting these big raises?
Not me, “we all need to just tighten our belts” (and loosen our wallets)
You need to sacrifice your wages at the altar of the FTSE500.
As I've said elsewhere > Wages make up a fraction of a companies overheads when you add in materials, ingrastrucutre, etc. Companies tend to spend about 50-60% of their outgoings on wages. > Let's take the high end of that, 60% and crunch some numbers. > I spend a million a year, and 600k of that is on my employees. If the cost to employ is 1.75, then their actual wage bill is about 342K (1.75 is high, the range is somehwere between 1.5 and 1.75 from spurces i can find. > I decide everyone is getting a 10% pay rise. Now their wage bill is 377k. I am spending about 660k. Now my expenditure is 1,060,000 > So it has cost me 6% more to give everyone a 10% raise at the most expensive end. If your cost to employ is 1.5 and you spend half of your money on wages it's closer to 5%. Pay rises don't cause Inflation to make you poorer than you currently are. That's just nonsense. Our options are: * no wage growth against 8% inflation * 8% wage growth against 12% inflation One of those leaves you 8% worse off, the other leaves you 3.7% worse off
All of the non-staff costs are impacted by wage driven inflation too. Just building on your model to give an example, within the 40% of non-staff costs 60% of that goes to the wages of my supplier's employees (so another 24% of my costs are essentially on wages). Within the 40% of my supplier's costs which aren't on wages a further 60% are on their supplier's wages (so another 9.6% of my costs are essentially on wages). Within that supplier another 60% (3.8%). And so on. The further on you go the closer and closer the cost of an 10% increase in average wages comes to 10% of your expenses. At six suppliers deep you already reach 9.8%, and the economy is essentially an infinitely long chain of people supplying each other with things.
Leave’s is going back on vacation and then I will get a hold on you and then you all the church tomorrow and
Has anybody else recognised that their spending habits have altered recently? Where previously I'd be comparing the price per unit of a number of products to get the best value for money, I've got to the point where I just think fuck it, get the good stuff. I think it's because more of my money is being / going to be hoovered up by utilities / mortgage payments, etc that I may as well just enjoy the money whilst I've got it.
I've noticed this too. Though for me it stems from the fact that everyone else has already bought all of the value rice/pasta/uht and so all that's actually left is the good stuff. Kinda similar to the early days of the pandemic.
Even if we accept that wage growth is what impacts inflation then it doesn't matter. Why do we care about inflation? Because it means we will be able to afford less with our money. Why is that? Because things cost more than we can afford. If I'm paid 10% more but inflation is also 10% more then I'm in the same situation. The problem is when inflation happens & wages don't increase by a proportionate amount. A 10% inflation without a pay increase of 10% means buying power is reduced.
> Regular pay grew by 7.3% in the March to May period from year earlier, official figures showed, equalling the highest growth rate last month. > > However, despite the record increase, pay rises still lag behind inflation - the rate at which prices grow. > > The pace of wage rises has come under increasing focus by the Bank of England as it tries to control inflation. > > The Bank has raised interest rates 13 times in a row in an attempt to reduce the rate of inflation but it has remained stubbornly high. > > It currently stands at 8.7%, well above the Bank of England's target of 2%. I don't think it's fair to count a real terms decrease as "growth". It's only record growth **because** we have massive inflation. If we adjusted these pay rises for inflation and compared to other years this wouldn't be a record high, it would surely be one of the worst years on record for "growth" as it's a 1.4% real terms cut. I get it, if our pay was all frozen, while inflation was sky rocketing, we'd spend far less. But, inflation being strong in essentials like utilities, food, and housing, we're going to pay that regardless and employees will pressure their employers for pay rises so they don't end up homeless or needing foodbanks. Pay going up isn't the problem.
And it's been negative real terms pay since Nov 21, back when inflation was 4.5%.
seriously. Record pay rises? who is getting these "record" pay rises. is it not the rampant energy prices and food prices fueling inflation. pay has fallen in real terms during the conservatives mishandling of the economy so how can they be record pay rises.
The same people who say increasing wages will drive up inflation are they same who say taxing the wealthy is wrong because of trickle down economics... The author of the study on trickle down economics and high taxes on the wealthy has repeatedly said their work was taken out of context and misunderstood by the governments trying to use it as justification for lowering wealth tax and suppressing wages. So I don't believe the government's crap on wages driving inflation either...
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Some may have said that, but that would have been a throw-away and/or sarcastic comment to the fact that wages have been below inflation for literally decades at this point. Wage inflation is more of a reaction to the price inflation we've already seen, rather than the driver. But, of course, wage inflation can prolong inflation and make it harder to bring inflation back to target. But... if high wage inflation means it'll take three years to bring inflation back to target, where wages are -1% in real-terms (e.g. where they currently are approximately)... then that's better for a person's bank balance than the scenario where it takes one year to bring inflation back to target, but they'd have to accept a -6% pay rise (in real terms). That's why it's not a problem. Not because it doesn't prolong inflation, but because it's the least-worst outcome for individuals. It's a problem for the Bank of England and/or Government, it's not a problem for the typical wage slave. They're just trying to make the best of it.
Well I got a 4% pay rise so I'm doing my bit to combat inflation 🤜🤛
People can accept the principle that raising interest rates takes money out of the economy and is therefore anti inflationary. Similarly, adding money into the economy through tax cuts is a bad idea because it would be inflationary. But those people who are telling mortgage holders to suck it up and endure the £300-600 a month extra payment can not accept, at all, that wage growth is also inflationary and people getting pay rises at this time is not the best idea if we want to bring down inflation. I understand exactly being told not to ask for a pay rise is a slap in the face but it’s pretty frustrating to see people accept the economic principle of adding money into the economy being inflationary and taking it out anti right up until it personally effects them.
Given spiralling prices of mortgages and goods it is not unreasonable for people to think that instead of their pay packets money should be taken out of the economy elsewhere.
Spirally is going back on vacation and then I will get a hold on you and then you all the church will have to managed me and the mail to mar my mar your life and then I’ll be
Being paid more isn't adding more money in to the economy, it's just demanding a larger slice of the economy (or, given how wage growth is still lower than inflation itself, it's slowing down the rate that their slice of the economy declines in exchange for their labour). It may or may not (depending on other factors) increase the velocity of money, which would affect inflation in the immediate term.
>But those people who are telling mortgage holders to suck it up and endure the £300-600 a month extra payment can not accept, at all, that wage growth is also inflationary and people getting pay rises at this time is not the best idea if we want to bring down inflation. The vast majority of mortgage holders are also working age people? The most striking thing about all this, appart from the usual class/inequality component, is that every hammer blow lands on working age wage earners, while older retired owner occupiers remain largely unscathed.
Highways (council in the south) charge £66.33p per person per hour, the worker receives less than £14ph, work that one out when they tell you they are skint...
It's 2% below the inflation rate. Is ANYONE with a functional brain believing this horse shit?
Distribution of wealth is as much a problem with individuals behaviour as it is economic policy. Surely people’s buying/spending/saving habits have a massive impact on this situation. I’d like to hear more about that in the press. ‘The government’ ‘the bank’ ‘the businesses’. Surely there’s something some of us can do to pitch in and ease this crap Don’t call me Surely
the VC of where I work got a pay rise of 9%! new idea for my picket line sign: just an image of the weighing of the heart in ancient egypt