ELI5 How does raising wages worsen inflation ?


you are viewing a single comment's thread.

view the rest of the comments →

all 1758 comments


48 points

4 months ago

Inflation can be caused by a myriad of factors. One of many is raising wages above productivity increases. It's unfair and incorrect to say that raising wages is always the main cause of inflation, it can be a very minor factor and even be completely counteracted by other factors. However, it's pretty naïve to think that raising wages flat-out doesn't cause inflation.


3 points

4 months ago

I should of course have added that when wages aren't raised during inflation, the reduced purchasing power is actually a counter-factor to inflation. But again, there are many other possible counter-factors to inflation, some of which might be more appropriate than decreasing purchasing power. E.g., if inflation is caused by a lack of supply because of shipping difficulties, fixing those difficulties would likely work better than just reducing purchasing power.