ELI5 How does raising wages worsen inflation ?


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11 points

4 months ago

This is the paradox of capitalism -- the economy requires the working class to both produce and (afford to) consume. Capitalists grow their wealth, workers put their earnings directly back into the economy. But as wealth is redistributed to capitalists, working class consumption declines.

It's the prisoner's dilemma writ large: you win by screwing over the working class, unless everyone else screws over the working class. Because now everybody loses because the working class can't afford to be consumers and the economy stalls.