True or False? Inflation devalues wages.

show me a link to those rankings

that just bolsters my assertion

 

http://klout.com/topic/economics

You certainly are right. Paul Krugman is ranked among the idiots.

 

Inflation most definitely does devalue wages, which is one of the main reasons hyperlibs are always raising hell to get the minimum wage raised to some new stratospheric height. Every time this happens, though, prices skyrocket, too, and the "leapfrog" effect between wages and prices goes on and on and on.

Right now the Libs are crowing about how great the economy is and how well Obamanomics has worked to combat the recession. In fact, it has had nothing to do with Obama -- it's been the Federal Reserve System all the way, artificially suppressing interest rates while it pulled trillions of new, worthless dollars out of thin air and flooded the planet with them. It's called "Keynesian economic theory"... it didn't work for Frankie Roosevelt during the Depression, and it isn't working now. All it does is plunge us deeper into catastrophic levels of debt and "kick the can down the road". An idiot's solution!

Socialists think there's been no inflation during Obama's "miracle" but anybody who goes to a grocery store, a hardware store, or a gas station knows better. And the real effect of all the Fed's meddling with, and strangulation of the free-market system hasn't even been felt yet... just wait until the next really big inflationary wave comes through to absorb all the excess trillions that the Fed created. I already hear the sound of wailing and gnashing of teeth....

 

i just looked at the top economic influencers, you're not even on the list

what a joke


top economic influencers

the economist

freakonomics

world economic forum

paul krugman

http://klout.com/#/topic/economics

 

Not if they only see a 20% increase from productivity and demand and a 0% increase from inflation.

Disagree with your opinion.

A wage measures or estimates the worth of one's labor.

 

You're looking in the wrong section. I never said I was a top influencer. I was my post was the Most Influential, as they are regularly and ranked higher than those of Robert Reich and Paul Krugman.

 

Sure I do. Asserting a blatantly false mathematical statement is not a hypothetical, unless you are hypothesizing a fictional reality where your own made up mathematics exist.

Says the guy who claims to have an advanced degree in economics but makes a blatantly false mathematical statement and refuses to admit he was wrong.

 

If there was 0% inflation then then I agree they would get a 20% real increase. And there would still be no devaluation.

It's not an opinion

A wage represents the current market value of one's labor.

 

Inflation devalues wages only when wages don't increase the same amount relevant to prices.

I don't know which libs are crowing about the economy. I disagree with the many conservatives who claim the economy is worth now than it was when Obama took office.

But in fact, the economy is not doing great. Here's why:

https://www.youtube.com/watch?v=JTzMqm2TwgE

You'll have to take that up with the socialists who say that.

 

Ethereal, you are spouting common sense. Therefore the haters have come out to attack you.

Inflation devalues currency. If an employer wants to give out cost of living (COL) pay increase due to the devaluing of currency, it sure helps the employee. But the only reason for a COL raise is because of devaluing currency. Point is, a separate act must be performed by the employer if they want to keep pace with inflation. It is up to the employer to decide if they want to compensate for the devaluing of the wage.

While someone who does receive a COL raise would see little difference in spending power, those without a COL raise would feel it big time as most people do these days.

As an aside, with such a common sense premise that you assert, how in the world can there be over 700 posts in this thread? Only 1.72% of those polled disagree with your assertion. I would love your comments on that.

 

I almost agree with you for once. I put it differently. It requires a COL raise to counteract the effect of inflation and the devaluation of currency. The devaluation has already occurred and a COL increase makes it appear to be normalized. This isn't a chicken or egg situation. There are millions who are hit hard by inflation.

 

Whether their income stays the same and there is some inflation, or their incomes go down and there is no inflation, they are hit just as hard. It is not inflation that hits them hard, but the fact that wages are relatively decreasing compared to other prices.

Because most of the growth in wealth and income in the country have been going to the 1%, not the middle class.

 

But if there was 10% inflation and they saw 20% nominal increase due entirely to productivity and demand, then they'd only see a 10% real increase when they should be seeing 20%.

Sure it is. One of the definitions of devalue is to underestimate. If their wages haven't appreciated as much as they should have, the worth of their labor and thus wages have been underestimated. Underestimating wages = devaluing wages.

A wage measures or estimates the current market value of one's labor.

 

Your math is too simplistic, and thus wrong.

(1 x 1.2) x .9 = 108% So a 20% raise with 10% inflation = 8% raise, inflation-adjusted.

 

We just might be having a half empty/half full perspective here. Spending power is cut when inflation hits. That is a fact. Wages do not always rise to compensate, that is a fact. The problem isn't in the wages, it is in the devaluing of currency. Without inflation, wages would not be an issue in this at all.

Then I would suggest if the middle class has a problem with that they should take action accordingly. Currently people are paying down debt, spending less, holding on to cash and buckling down. We are all in for a longer ride than expected.

I have no problem with the 1% or anyone of any percent. Each to their own, each in their own way. You make it sound as if your 1% do not deserve to make a buck, or that there should be a limit to what they make, or that they have too large a share. Envy shortens your life.

 

The issue isn't the exact calculations of the math, which DR is fully capable of, but the effects of inflation on wages

 

Spending power of a dollar is cut, agreed.

Spending power of a wage depends on whether or not the wage increased more or less than the level of inflation.

That is true, real wages (relative to prices) sometimes, typically in a recession. The problem is wages, in that they are not increasing fast enough. Without inflation, wages would fall. And you'd be in the same boat.

Inflation affects the price of labor just as it does the price of everything else.

Agreed. They took a step in the right direction not voting for Romney

The 1% is not in the ride we are in.

How do you figure the 1% "deserves" to get 20% of the nation's wealth as opposed to the less than 10% they got 30 years ago?

 

Gotcha. Fuzzy math in support of simplicity is no vice, apparently.

Now then, it's obvious that inflation devalues the units used to acquire things. In the US, those units are US Dollars. And everything based on the units is thus affected: wages, savings, real gains, etc.

It seems silly to even debate it, wouldn't you agree?

 

If there was 10% inflation then the real increase due to productivity would only be 10%.

And there still would not be a devaluation.

No one is estimating anything. I don't know why you keep bringing this up. This is not an estimation issue. there is no "understimation" or underestimation issue.

You are trying to fit your argument into a definition you found. It doesn't fit.

How does a wage "estimate" the the value?

 

Not when the issue is over concepts and not specific numbers. Whether it is 10% or 8% doesn't really matter regarding the issue we are discussing. If we were talking about what the actual figures were in the economy, for instance, I'd agree that precision is warranted.

Though I'll note DR himself thought this was a huge issue in a recent discussion he had with Dujac, so much so he put a quote in his sig. So goose/gander, fair enough.

A wage is not a unit but a dynamic aggregation of units.

If inflation increases 10% and wages increased 20%, the unit (dollar) has been devalued 10%, but the wage has not.

I don't agree, because it illustrates a grand misconception.

Folks like those who started this thread and voted "aye" seem to thing inflation operates on all prices in the economy except the price of wages. Then the double that error by assuming wages are static in a dynamic economy in which you have inflation.

Neither case is correct. Inflation affects the price of labor like it does the price of everything else. And wages are not static -- they change over time. Over the long term, they have increased faster than inflation. Over periods of recession, the increase slower or not at all.

But it is not, contrary to apparent belief of many, a function of inflation. It is a function of supply and demand and productivity other factors that affect the real value of wages.

 

Not if the intended real increase was 20%.

I disagree. The worth of your labor (wage) is being underestimated if your real income isn't as high as it should be. The reason it is underestimated is due to inflation.

All wages are an attempt to estimate and quantify the worth of labor in terms of dollars.

 

No one intended anything.

No one estimated anything.

Wages don't estimate anything.

 

The problem is that you're assuming that all prices are affected by inflation at the same time, including wages. We know this isn't the case. Sometimes wages lead inflation, sometimes they lag inflation. For example, take unemployed folks who aren't receiving benefits that are relying on savings. They have zero income, but prices have gone up more than 11% since 2007.

Or, another example is myself. I have been a member of the labor force for the past year and a half, and I have not seen a wage increase. Prices on average have gone up about 3% since then, but my wages haven't moved. So my real income has gone down about 3% since I started working. This is because my wages have lagged inflation.

The point is that wages have only increased faster than inflation on average. That's discounting the fact that some people's wages haven't gone up faster than inflation.

But inflation creates a temporary distortion in the market supply and demand signals, by causing some people's real incomes to fall until they get a raise to compensate for inflation, if at all.

 

False. The wage increase was a reflection of the agreed intentions of the employer and employee.

False. The employer and employee estimated the value of labor in terms of dollars and agreed upon a value.

False. Wages estimate the value of labor.

 

I am not assuming that at all. In fact, in my hypothetical, I assumed wages rose 20% even though inflation was only 10%.

And in my hypothetical, I assumed salaries rose twice as fast as inflation.

I'm not talking about individual various. I'm talking about a situation were inflation has been 10% and the wages increased 20%. Of course there are individual variations.

If you want to make it individual, when inflation is 10% and an individual's wage has increased 20%, there has been no devaluation of his wage either.

[/QUOTE]

I agree it can temporarily, but then wages get back into equilibrium.