Yes we want raises that beat inflation. But I think what we really want is a bigger share of the profits a company makes without them raising prices. Unfortunately, Wall Street demands ever growing profit margins and revenues. Meaning that whenever wage increase, they simply do their part to cancel them out by raising their prices as well.
I get that some companies have slim profit margins and can't do this easily, but others can clearly choose to pay their employees more. They just choose not to. This is an ideological thing and not an impossibility. See Gravity Payments.
I'll be honest, having worked at companies with profit sharing, you're better off taking the raise unless you're working for commission, and even then now is a rough time to be on commission.
If you can afford to risk your income on your company's fortunes, start your own or join a startup with a founder who seems trustworthy.
For me and most people, predictable income is much better than risky equity.
I don't really disagree with you, but I also don't think you're really responding to what the OP was saying.
He isn't saying: We want a profit sharing agreement instead of salary.
He's saying: Extra salary that is immediately covered by the company raising the cost of their goods (rather than say - reducing executive pay, removing middle managers, or making less money for shareholders) doesn't get us where we need to go.
Because if the cost of buying all your goods is going up in direct relation to the raise in salary, (and this is happening across the market: inflation) - you aren't really getting a fucking raise at all. You're just floating.
The answer instead (at least in my opinion) is to change tact on how companies prioritize.
1. Workers need to be valued above shareholders (drive long term growth rather than sacrificing the golden duck for next quarter's profit)
2. Discrepancy between CEO and average pay needs to be curtailed - the current balance is driving a huge wedge into the relationship between a company and its employees.
3. Remove the inappropriate leverage that companies wield by controlling your healthcare/medical insurance costs
4. Remove pools of labor that are self-defeating: Jobs that pay so little the employee must be subsidized by government programs to live (think walmart/uber/etc) The best course of action here is likely labor movements (unions)
Well, not necessarily. In terms of raises/salary increases that's more of an issue for the unions than the Betriebsrat, since it usually concerns a whole industry and not just a single company.
As for the "valuing workers over shareholders" stuff ... Well, maybe? To be perfectly honest this isn't really what a Betriebsrat is about. I mean sure, they do have some influence, but in general their territory is more in terms of company operations, less in terms of how much is paid out to shareholders.
To be perfectly honest the Betriebsräte are facing much of the same problems that most other elected bodies are facing in the western world (or at least Germany). Sinking voting share, less and less people caring about it and as they kind of loose some soft power.
They still have the hard power guaranteed by law of course, but their soft power is essentially waning.
A lot of people think that companies aren't paying their employees well because they're greedily hording cash and if they'd just give that cash to their employees, wealth problems would be solved. I would suggest to these people to spend some time looking at the largest companies in the world, taking their profits for the year, and dividing by the number of employees they have. I have done this exercise a few times. It will open your eyes about a lot of things w.r.t. business.
We here on HN are the ones who need to do this most of all because we work in the industries and companies that have for the last 10 years actually made enough money that the division results in something significant. This is not the norm. You can easily end up with values in the hundreds of dollars of profit/employee for a more normal industry. Even if the profits were 100% shared, we aren't necessarily talking about pulling people out of poverty or something.
The parasite class in society is smaller than you think, percentage-wise. Quite a lot of us go to supporting just one of them. I think getting rid of them would be a great boon... but not because simply redistributing their wealth would solve very much. The real problem they create is that they steal $X dollars and end up creating second-order effects that mean $X·Y dollars of wealth are never created in the first place, where Y is pretty significant.
Whether equity or paid out monthly, it's variable income that most people can't count on. When you're in a big enough company that you individually can't feel yourself moving the needle, the end result is that it's not much of an incentive. This is especially true once the company gets over a few hundred employees.
Source: Have worked for profit sharing companies before.
Joining a startup isn't a good way to share in a companies upside unless you're one of the first few employees. You only share in the upside of wildly successful companies, and even then it's many years delayed from that success and has the potential to be whittled away by preferred rounds ahead of you, executive carve outs, etc.
Gravity payments raised salaries as a vindictive measure against a co-founder / brother who sued the CEO for taking a salary of $1million, which was way too high for their revenue at the time. Dan Price took all the profits they were making, divided by the number of employees and gave everyone that so the brother would make no money on his equity. This was a way to screw his brother and fend off the lawsuit at the same time. A bunch of senior engineers quit because they did not receive equal pay increases. He also divorced his wife days before increasing his salary from $50k to $1m lol. Guy is a scumbag.
It goes beyond just that. When interviewed about the matter by Bloomberg [0], the CEO lied about the lawsuit timelines, and when he got called out by the interviewer, he repeated the lie and cut the interviewer off. The CEO claims he got sued for raising the salary for all the employees, but the lawsuit against him was served weeks before (and it was for a completely different reason), and he signed it himself. But he claimed he hasnt even heard of the lawsuit before he raised the salaries.
Oh, and he pretty much unambiguously abused his wife (Chris Brown style, i.e., pretty violently), but was also super dodgy and aggressive about it with the interviewer. I found that Bloomberg investigation and interview to be pretty in-depth and well done.
This is spot on. I think there is a nuance across industries that is often missed here too. Certain industries really can’t raise prices or wages without tanking the business. Restaurants, mechanics, doctors, etc are often operating on razor thin margins with prices set by the market. For medical/dental/therapy their prices are often set by insurance reimbursement rates that haven’t kept up with inflation.
The flip side is like you said, companies raking in record profits with massive cash on hand. They could easily afford to share more with employees and would probably benefit from a happier and more invested work force. The stratification between C-level and everyone else is higher than it’s ever been.
Hm - interesting theory. The landlord does have some expenses, though: upkeep on the property and taxes, as well as some bit of "float" for times when the property is vacant. There's a definable "margin" there, too, but I wouldn't know where to look to find out what.
> There's a definable "margin" there, too, but I wouldn't know where to look to find out what.
Not enough of one to make becoming a landlord a guaranteed way to earn an easy profit, or everyone would do it. Lack of startup capital wouldn't be an issue either—banks would be happy to front the cost if you can prove the venture will succeed well enough to pay them back with interest.
> But I think what we really want is a bigger share of the profits a company makes without them raising prices.
Only as long as you're willing to have the same share of the losses, too, but most aren't.
Of course everyone wants to get max(salary, share of profits, commission) when the company registers losses, and sum(salary, share of profits, commision) only when the company registers profits, but I just don't see such a thing ever working.
What does this even mean? do you believe C levels and board members personally mope out of the office with dog-eared pockets each time the business loses a customer? do you assume the losses arent already gifted to the workers in the first place in the form of salary cuts and mandatory overtime?
the issue is wealth inequality. that a CEO can earn tens, if not hundreds of times more than a line worker without so much effort as to even show up to the office, that is the issue. that a cloistered elite of leadership exists seemingly immune to even the worst outcomes of business, only to arrive in yet further opulence after they retire in golden parachutes flush with shares of the company the excess capital of the workers themselves built in the first place.
if you want people to show up after the pandemic to swing hammers and build products, you need to give them more than the cost of the gas to get to work and a half hour lunch.
"It used to be that in the 1950s, 60s, and 70s, CEOs made 3.3 times what a top 0.1% earner made. Now, it's more than six times," says Mishel. "CEOs now are making 351 times that of a typical worker, but back in 1978, it was only 31 times. In 1989, it was 61 times."
And it's not just CEOs. IMO there should be federal guidelines that total compensation in public companies should be more fairly distributed, ie, executive staff can only make X times more than average worker pay. But you know what companies would do, right? They'd fire all the employees, setup mini companies to employ the workers, and bypass the regulations.
It’s worked quite successfully, in this country (assuming USA), in the past. It currently works reasonably well in Japan, where executive pay is capped as a multiple of the lowest paid worker at the company. In the US, executive pay has never been higher relative to average worker pay.
The gap in wealth is real, it’s increasing, and it absolutely does not (in fact, it cannot) need to be this way.
But America being the land of greed and selfishness, there would be a simple solution: Split the company into two legal entities. One which employs all the jamokes getting next to nothing and another which employs the C-suite folks. Even without such a dramatic split, a law like this would likely mean that they’d shift all low paid employees into contract roles.
None of which is to say that I disagree with the goal, just that one should never underestimate the greed and psychopathy of the typical C-suite individual. These are people who will have employment contracts that guarantee them a multi-million payout if they get fired because they’re shit at their job.
I mean sure, but the argument of "people will just try and work around it" can be made for basically any regulation ever put in place. That doesn't negate the importance of the regulation, and it doesn't make the regulation ineffective. It only acknowledges that the game of cat and mouse between regulators and the people playing the game exists.
It's in the same vein of "criminals will just find a way to get guns if you make guns illegal". Some will, certainly, but the argument itself is an argument against the rule of law entirely. Some criminals will speed on highways, some criminals will steal, etc. But laws are still effective in curtailing this behavior on the macro level.
Laying off workers is often the right thing to do for the health of the business. Companies are not make-work schemes, designed to employ as many people as possible, and shouldn't be. They're there to provide value for customers, as defined by customers demonstrating that they value the thing the company provides more than the money they give up to get that thing, and constrained by the fact that the business itself has to be profitable to be sustainable and keep providing that value. That sustainability includes the capital needed from investors to keep the business producing and innovating. There's competition for that capital (and there should be!), so if returns are higher elsewhere, that broadly means the alternate use of capital is providing value to customers more efficiently.
If someone at the company identifies a set of inefficiencies in producing value for customers, and remedying that involves laying off a bunch of people, but ends in providing that value more successfully, that person has been responsible for a lot of value creation.
The executives who are responsible for all the excess hiring should also be removed for their failures as well so they can be held responsible for their mistakes.
Maybe, and that sometimes happens... when it was definitely a mistake. But it often wasn't; the company has to make the best decisions given the information it has, AND things change. You don't fire people every time they make a mistake -- you fire them when you don't think their judgment is adding value. And while it might seem like that should be different when the mistakes are more impactful, it just means companies need to hire as well as they can (which often involves high compensation) to make the best bets on that judgment.
Judgment isn't about having been right -- it's about making the best decisions given the information you have at the time, and that means that some good decisions turn out not to work out in practice. Companies have to try things out to innovate and find new, better ways of creating as much value for customers as possible. You might hire 50 people to develop a new product line or offering, because it seems like it's going to work. If it then almost works, but the margins aren't good enough and it looks like there's untapped market, you might hire 100 more to scale it up because it looks like it will work at greater scale. But ultimately, if you end up not being able to make it work, you have to shut it down. Maybe some of those people fit elsewhere in the company, but usually that's very few. So layoffs are needed there, and it doesn't mean someone needs to be fired.
In many cases of layoffs, the employees were profitable... until they became unprofitable because circumstances changed. That's often the case at big companies. You find success with a product, but then consumer tastes change, or someone innovates better than you do (or gets luckier). You can't just keep that unprofitable product going to keep people employed -- someone has to make the hard call to hard pivot or exit that market. It doesn't mean the people who set that product line up made a mistake and need to be fired.
I usually see this argument about the utopian company which shields employees from the losses in debates. In the real world a company making losses cuts down on employees, wages, increases working hours for same pay ; all negatively affecting the employees in a desperate attempt to survive, failing which the company shuts down causing loss to all employees.
They are however not sharing the increased profits with the employees when they are highly profitable, they don't hire more people than required because profits are more.
I see there is a market value that the company has to pay for labor. The additional profits are generated due to the performance of the employees, they should get a share in the profits for their contribution, the investors putting in the capital are currently taking 100% of the profits. There should be a share in this for those putting in their sweat and brains.
> In the real world a company making losses cuts down on employees, wages, increases working hours for same pay…
All of that only affects future earnings. The employees' wealth (savings) is not tied up in the success of the company—they can quit at any time and go work somewhere else. Everything they've earned up to that point is theirs to keep, along with intangibles like training and job experience they've received along the way. This is their share for "putting in their sweat and brains".
For the shareholders, on the other hand, a company taking losses doesn't just impact future income. Their entire investment is at stake.
If an employee prefers equity rather than income they are free to purchase shares in the company with their earnings; as a rule, though, employees just want to put in their hours and get a steady paycheck which they can spend or invest as they please. They don't want to be forced to invest in their employer such that the prospect of their employer going bankrupt threatens both their paycheck and their savings.
The investment of shareholders is at stake irrespective of whether they share the profit with the employees, success of the company is a different function altogether.
>For the shareholders, on the other hand, a company taking losses doesn't just impact future income. Their entire investment is at stake.
Investors who do not get more returns in the companies compared to a debt instrument will take their investments to companies which can offer better returns, that is how they should manage their risk without getting bankrupt.
There is a chart above where some companies have profit/employee close to a million dollars, intellectual property of the employees is not valued enough, value is only attributed to the capital invested , which if you look at companies which are overvalued is not the rarest commodity; employees are not a rare commodity but good employees are.
> Investors who do not get more returns in the companies compared to a debt instrument will take their investments to companies which can offer better returns….
Of course, but to do that you first have to find another investor willing to take your place by buying your shares. An individual shareholder might leave but the shareholders, as a group, are just as invested in the fate of the company as before.
I agree, the company in total loses value when it shuts down, the employees are left without any jobs causing loss of livelihood , investors are left with a loss in share value.
Employees can get another job , investors can diversify and manage their portfolio better, there usually higher risk inherent when higher growth and dividends are expected.
What I am saying is everyone is affected when a business shuts down, its not something which affects only investors, employees are also affected, but when the company has record profits in most cases it is provided exclusively to investors and no portion on the profits are shared with employees.
I see salary as a way of booking the employees time, a share in profits is what they should get for how productive they are in the booked time.
> Employees can get another job, investors can diversify and manage their portfolio better...
Employees can get another job after the fact. Their skills and experience are mostly transferable. I'm not saying it isn't disruptive, but they haven't lost any principal or equity, just the opportunity to sell more labor to that particular employer in the future.
For the shareholders at the time to business goes bankrupt it's too late to try to diversify. Their shares are worthless and they are out whatever they paid for them. (BTW, telling them to diversify ahead of time is equivalent to telling them not to invest as much into this company... which isn't great for the company or its employees.)
> ... no portion on the profits are shared with employees.
The employees' fair share of the profits is their salary or wages (plus performance bonuses where applicable). If they want equity they can buy it with their earnings, but in general it's a bad idea to hold too much equity in your employer. The trade-off for sharing in "record profits" is sharing in the losses when the company doesn't do as well.
I think the awareness of that reality would turn a lot of heads and make many more developers think, “wait, is this a bubble?” instead of developers jumping from 300k to 400k VC funded niche simple-website-as-an-app jobs with 10 to 500 employee growth in 2 years, saying “dude trust me this company has a future”
A zillion 'tech' companies with massive scale operating losses (hey would K8s help with the scaling?!?) are about to find out what it's like when the financing spigots get turned off. Their employees will definitely take a large share of the hit.
In the public version of that you can already see how that's working out, as their stocks have routinely collapsed by 70-90% over the past year. Those companies will either have to sell themselves off for a fraction of what they were formerly worth, slash expenditures heavily (ie fire employees and cut expansion plans), or heavily dilute to raise some funds and pray the beating stops before they run out of money.
The crash that the pandemic should have brought forth (and nearly did), is here now. They temporarily papered over the disaster, and the bill has arrived regardless as it always does.
Some examples:
Snowflake: $715m operating loss on $1.2b in sales (lol) | Unity Software: $591m operating loss on $1.2b in sales | Roblox: $511m operating loss on $2b in sales | Palantir: $336m operating loss on $1.6b in sales | Robinhood: $2b operating loss on $1.6b in sales (lol) | Affirm: $632m operating loss on $1.2b in sales | SoFi: $411m pre-tax loss on $1.1b in sales | Twilio: $936m operating loss on $3b in sales | Uber: $2.7b op loss on $21b sales | Lyft: $865m op loss on $3.4b sales | UiPath: $500m op loss on $892m sales | Asana: $265m op loss on $378m in sales (lol) | Lemonade: $258m pre-tax loss on $149m sales (lol) | Fastly: $232m op loss on $371m in sales
And so on.
Some of these loss vs sales ratios very much resemble the excesses of the dotcom bubble. When the music stops (as it has), the losses become a lot more difficult to manage, the market smashes the stocks, customers pull back in recessionary environments, losses get even worse, companies have to slash and burn, and a lot of things go sideways in that hurricane.
Companies like Twilio have seen their stocks implode by 80% for good reason, they're bleeding very badly, their businesses are unsustainable as is. Lyft is a dead company walking, they have to sell themselves off if things don't promptly turn around in the economy and market (which appears unlikely); they're 75% below the IPO levels, it's a disaster for nearly all the shareholders (including employees) that have held.
How much is eg Asana really worth when their business consists of $265m in op losses vs $378m in sales? It's a joke. Discount it by 90-95% from the top and that's probably a reasonable start to the grinddown ($145 to $18 so far).
How about Fastly? They're dead. They probably have no choice other than to sell themselves off. For fiscal 2021 they added $64m in sales and $112m in operating losses to get that. Aggressively slam the brakes and their stronger competitors will just eat their business, don't slam the brakes and they're dead. $64 to $10 so far on the stock. They're dinner for Cloudflare, Amazon, IBM, someone.
These guys are all seriously fucked in one way or another. Those op losses vs sales are comical. Be sure to say hello to the brick wall you're about to slam into. They have several bad options to choose from to start dealing with their epic scale losses (and if they don't, the market will just smash their stocks that much more), including praying that the bad things just pretty please stop happening.
Adding blank lines between the companies would format it in a rough table.
But yeah, these are nuts and almost all these companies were dependent on "stock go up" and now the chickens have come home to roost. They'll all be acquired for pennies on the dollar by big players (though the really big ones like Uber might survive by massive purges).
Roblox and Robinhood are the most amusing, how can you screw up a money spigot so badly?
I dislike the extra spacing that HN requires for that style. And unfortunately I'm not aware of any way to do line to next line without the surplus spacing. I have always thought it would be a rather useful formatting option here.
Of course there are a lot of big FAANG type companies, and there are a lot of startups with VC funding. I used to work for Google and now I’ve run my own company for the last 10 years without VC funding. I imagine there are many many countless companies similar to mine. I focus on growth and we never have a ton of money. If we get more money we put it into our current and expanding workforce. We do keep some money in the bank but only so we can make sure our company doesn’t fail at some point. But companies are fragile things, if we lose enough employees and can’t get new employees and train them fast enough we probably fail. If we raise our salaries too high and can’t get enough revenue in return we fail. If we have a sales guy who we pay $70k base with $150k commission, then he leaves for $140k base job and we have to in turn hire a $130k base salary guy with $200k commission - what do we do? (This is a real world example) - well we now have one sales guy for almost the same price as we were paying two before. Basically we need to make more money or let people go. A single sales guy can only have so many conversations so we probably need to raise our cost of our product. Which assuming our customers even accept it, will increase their costs and it just keeps repeating down the line.
The current type environment is not kind to my type of company and it definitely will cause a lot of companies to fail. We have an amazing product with great demand and i think that’s what has saved us, but please imagine a company that is similar to mine. We try everything we can do to retain our employees, pretty much every dollar we make goes into employees since our product is software. When we had bad years I set my salary at $40k since i wanted the company to survive and we were still small and it made a difference. A ‘normal’ company like mine is totally restrained by cash flow, its a pretty simple equation. When you start having costs increase (i.e. salary) you have to balance it out somehow with more revenue somehow or reduced costs. A gradual increase is always better so we can start planning for it, get loans, get investment, gradually increase our price. Price shocks and huge changes are never easy to handle. I believe companies like mine are doing something good - innovating and creating good products and providing a much better service to our customers than Google and others can do by the virtue of us still being small and nimble and customer focused.
Is Gravity Payments actually paying well, or is their CEO just very actively marketing on LinkedIn? (I blocked him last year, I find him and his posts annoying)
Sort of. The bosses have shares that go down in value, but it's not like they are paying into the company from their personal money to balance the books in most cases. (Not that this never happens, but it is rare I bet.)
Many founders will do this directly or indirectly. Most businesses are not tech startups from the last 20 years and don't have access to capital outside of a bank loan to the founder(s).
This is not true. If it were, then inflation would run away. Prices influence demand, so companies can't just raise prices whenever they want. But capital in itself also has a relationship between supply, demand and price, often called rent-seeking behavior.
If you are interested in this kind of topic, look into microeconomics, then macroeconomics.
Supposing that a company could always exactly offset rising costs by raising prices assumes that such a company was not setting an optimal price in the first place. If they could increase profits by raising prices, they would have done so already. Low labor costs aren't what's keeping McDonalds from charging $15 for a cheeseburger, it's the fact that nobody would buy a cheeseburger for $15.
These capitalist demands affect the morale of workers who don't get compensated fairly. It also makes it much, much more difficult for small businesses without $1B of borrowing power to compete with public companies. This limits competition (sales), which is bad for consumers. It limits competition (hiring) because small businesses simply can't pay (even half of) what a lot of public companies can.
So consumers lose. Workers lose. Everybody is stressed out and pissed off. The upper class is oblivious or doesn't care.
Another economic dynamic outside of major cities is that housing might be more affordable, but goods and services (mostly) cost the same as anywhere else in a global economy where prices are controlled by the biggest players.
job creators have been printing money for more than a decade, with the powerful policy lever of "do not let working people get it, it will cause inflation" .. meanwhile check out the price behavior of appreciating assets, and important upper-middle class consumables. The stock market beating value records is not even reported since it occurs so often.
The parent comment here amounts to "if working people get more money they will cause inflation"
None of that is inflating. Real money, voluntarily given, backs any investments. Valuations are just the price of the last share sold multiplied by the number of shares. They aren't to do with inflation.
Inflation (in the US) is caused in Washington DC. Printing more money to spend, subtly taxing everyone by that increased percentage, and by policy.
> Printing $4T+ into asset markets didn't cause inflation, but printing $0.4T+ into peasant hands did?
Fiscal policy is far more powerful, monetarily speaking, than monetary policy. It's not 10x more powerful. But a dollar the Treasury creates is minted. A dollar the Fed creates is lent against an asset. It's a small difference with massive multiplier implications. (It's why, in a crisis, fiscal responses are so pleadingly called for by economists and central bankers.)
Yeah, if you print money and give it to rich people they are less likely to spend it in the real economy. It still increases the purchasing power of rich people. It still pumps assets, favoring asset holders at the expense of asset purchasers. It's still weaponized class warfare.
If you want to call this something other than money printing -- "lending," for instance -- I'm going to ask you to put money where your mouth is and bet that the Fed actually reduces its balance sheet to zero in some time frame.
I have a sneaking suspicion that you will not be keen on taking this bet.
A financial instrument does not require as many physical raw materials to produce as fuels, food, computers, or homes. Indeed, they often don't require anything but bits.
It seems obvious that the $4T deployed into the imaginary playground of the asset markets wouldn't cause near as much inflation as $0.4T+ in the hands of peasants with their needs for tangible goods. If traders attempted to move $4T en masse into purchases at retail, the system would have crashed immediately.
Putting money into asset markets causes "asset inflation" (see Nasdaq skyrocketing, until recently), putting it into "peasant hands" causes "peasant goods" inflation (hence the food or gas prices rising).
"Peasant goods" rise in price because the owners demand it after seeing an opportunity to do so. They could just keep stable.
What is happening since half a century is that wealth gets shoveled to the top, with the above mechanism plus many others, while "peasants" can't afford their own place and education for themselves and their children anymore. They get cut off from sustainable spending and get turned back into pre-war wage slaves.
What will happen is either owners getting to their senses and stop extracting so much god damn stuff for themselves for no reason, or workers rising up. Hiding behind political BS and pseudo science is a short term strategy that always ends in tears.
Also it's probably educational that the "peasant good" that exploded is actually fuel, which has far reaching consequences, and zero rationale for getting more expensive.
What that did was vacuum a lot of money off the market, additionally causing compensatory raised prices because there's an excuse.
The market never works on supply and demand, not even money, it works on increasing prices every other excuse to the maximum level unless it's forced not to.
At least part of this doesn't make sense. Why would giving people more money cause food price inflation? Were they not eating before? Did the demand for food skyrocket because people had money? Unless you're suggesting that food prices rose because food producers saw they were leaving money on the table, but this seems like a problem that could be solved with antitrust since collusion would be required to "artificially" raise prices in concert.
FMCG businesses try extremely hard to keep their costs low because their margins are razor thin, because competition means they must.
If people feel comfortable paying even slightly more for goods, then the massive efforts to keep prices down can relax ever so slightly, and they can make more money in other areas (e.g. putting the money into decor or other nonessential feelgood factors that consumers will prioritise over prices).
When Congress spends money, it doesn't print it. It borrows it, at interest. Everyone talks about the national debt, but then they start talking about printing dollars in the next breath. Makes no sense. New money comes through the banking system, not Congress, and banks create money when they lend--a decision that depends on economic factors. However, when Congress moves around money, e.g. by borrowing from investors to give checks to lower income and middle class folks, that can cause inflation by shifting dollars to where they will be used for consumption rather than in investments, which tend to increase productivity which offsets inflationary effects of spending. However spending on lower income folks is almost surely a good bet in the long term, and while it may be inflationary in the short term, in the long term it must increase the productivity of the work force (and its inflationary effects can go away as soon as production in expectation of increased demand of those consumer goods ramps up).
For increasing the money supply my understanding is nothing to do with Congress - QE is the central bank purchasing (with new money) longer-term securities, and the other main process (I don't know the name of it) is where the central bank lends money (new money) to a commercial bank, which agrees to set some of it aside, and they can re-lend the rest out to other commercial banks. But neither process is borrowing.
Those processes increase the money supply, which requires prices to go up, which requires wages to go up (or vice versa). Asset inflation is totally different, which was my original point.
I've come to believe that the whole "wage increases cause inflation" meme, while perhaps not strictly false, is pushed largely by two groups: economic fundamentalists who see economics more as a religion than a tool, and apologists for the rich (who break down into subgroups: e.g. paid shills, temporarily embarrassed millionaires, and Stockholm Syndrome sufferers.)
In any event, it's blindingly obvious to the rest of us that today's inflation is caused by profiteering on the part of large corporations and Private Equity, etc. The Haves are having more of the pie. I just want to reiterate this in case anyone's feeling gaslighted by the relentless propaganda ("If we pay you more we have to charge you more, silly workers." BS.)
Yeah.. they would be the type when billionaires and corporations cause pollution to destroy the earth to say.. it was your fault too. I might be 0.000000005% responsible for something but that doesn't mean that the people majorly responsible shouldn't have to do more to fix the issue.
To a degree. Companies also have to have a stable society in which to operate, and the lowest classes in American society have zero ability to absorb any additional costs because over the last 10-15 years, the increase in data collectability + Fed/government policy giving the indicators that the free money spigot will go on forever and the working class can suck it has meant that it's been feasible to run things where the lowest are treading water but not getting anywhere.
Now that inflation is hitting, the choice is: Give those people on the bottom more money or start incurring costs in other ways. If people can't feed themselves and their families on their wages, they aren't going to slink away and die to serve the Economy: They're going to start doing things like robbing grocery stores. Which means said grocery stores have to invest in security, lose more of their (now hard to get) stock, etc.
The problem is that you give the people at the bottom more money, then people in the middle wonder why they're busting their asses for only a little more than they'd get at Wal-Mart, then THEY start leaving or demanding more, and so it goes.
It's almost like running a society with no resilience is a bad idea. Go figure.
Likewise, a lot of businesses (especially in large cities) rely on being able to pay low wages because people commute from long distances; once energy prices get high enough, that won't work.
Low wages have basically been subsidized by the government since at least 2008 and now that it's ending it's a shitshow.
It's almost like it's a good idea to raise all wages, and in a flat way. Barring that, enforce price caps on important things or outright make them free.
There are some things that just cannot be addressed via free markets. There are some pre-conditions for markets that just cannot be met: Either because the demand for something is inelastic OR there's no way for the consumer to have the information they need to act in a rational fashion (in the economic sense of the word).
I'm not anti-market; the closest thing to my economic position is market socialism, but treating housing and water the same way as video games is moronic.
Linking it automatically the the CPI is dangerous (as, I believe happened in the 70s and early 80s when union contracts were stronger and more ubiquitous). Linking it to productivity is much better. Some will say it already is, but I seriously doubt that is actually true, as the linkage between wages and productivity seems to have been broken decades ago and the power imbalance between workers and capital have only become more exacerbated.
> Inflation is not something that "happens" to us, it is something that we cause.
Really? I can't raise prices on anything. I'm just some plebe.
People who opportunistically raise prices (blaming Russia or COVID or the weather or whatever else) cause inflation.
Yes, we plebes allow it. We could all pressure our politicians to put a stop to that. We don't. Sadly, we don't even know how to pressure our politicians if we wanted to.
You cannot easily pressure somebody who gets paid to not do what you need them to. That would take enormous violence. Even getting them out of office is no consequence due to revolving business and lobbying doors.
> Inflation is not something that "happens" to us, it is something that we cause.
This is like corporations reminding us about _our_ carbon footprint.
Yes, we may be part of the problem. But for the past several decades, wages have stagnated while profits and sometimes inflation, have grown. Thus we are an infinitesimal part of it.
Let me have a higher salary at the expense of corporations profits.
> Raising wages with Consumer Price Index (CPI) is dangerous, because it could cause spiraling inflation!
Inflation isn't homogenous [1]. Geographically, but also across different income brackets.
In a stable price environment, it makes sense for both workers and employers to negotiate wages market to market. America has historically had stable prices across the relevant time periods. We don't, presently, which is causing wage negotiations to start paying attention to a new data source. That the data wasn't considered before isn't some grand scheme or conspiracy; it's just that it wasn't the most relevant component.
What I am mostly seeing is people in the middle and upper income/wealth deciles complaining about their quality of life going down because the people in the bottom income/wealth deciles are getting higher wages and better work schedules.
Many people might have been able to afford fast food at 11PM, but maybe they cannot now. I see that as an improvement for the person that no longer has to work a fast food job at 11PM for the lowest wages.
One thing that's strange about the US is because of national chains and their advertising, prices are basically the same across the entire country.
Dominos in podunk town X where there's the franchise owner and his wife running the whole show sells two pizzas for $5.99 each, and Dominos in New York sells the same.
Sometimes you have "at participating locations" but rarely have I seen that actually used.
I see different prices on Walmart and Target’s websites based on location.
The universal pricing might have been more pervasive when land and labor prices were not as different across the country, but there is only so much of a hit sellers can take from higher cost of goods sold.
Interesting enough with Target at least, the website "pickup" price is often higher than the in-store on the shelf price.
But the nationally advertised things will be at the "fixed" price whatever that is, usually.
Grocery stores have been pretty good about having local flyers, we don't really have national grocery store chain ads, and I suspect we'll eventually stop having many ads that mention price directly.
I compared pickup in store price with the price in the store for the past 2 years, and they are the same at my Target every time.
However, in 2017 to 2018 or so, I noticed that online prices were higher than the in store prices, but they did not have online order and in store pickup back then.
On the item, I see a little i next to the price and it specifically says “price if purchased online”. Pressing the i icon opens a screen that explicitly says the price will be different in store.
Yes. It would certainly cause a wage-inflation spiral.
Even so, such a spiral could be straightforwardly prevented if the policy intended to bring high wages was coupled with a policy requiring forced savings.
There is no fundamental reason why high dividends does not cause CPI inflation. However, because of concentration in company ownership a larger fraction of dividends are reinvested than the fraction of wages that are invested-- i.e. those with large holdings have a lower propensity to spend. However, we can reduce the propensity to spend of those who work with laws.
Such a policy would also permit reducing the extreme taxes on wages in some countries-- without a policy like this if we set taxes on income from wages equal to income from dividends, investment will drop and we will get CPI inflation-- a very undesirable situation. With this kind of policy, one wouldn't.
2. Reduced financial subsidies to US: less world appetite for U.S. treasury bonds
3. Fed easing revealed now as pushed too far, given the world's run of very bad luck: COVID followed by war in Ukraine.
So, the world has gotten poorer, the "pie" smaller, and most of us are going to be getting smaller slices for some time.
As much as I'd like to see all the world pie's assets now held in the form of say, mega yachts seized and converted to floating medical clinics run by Medecin San Frontiere, I wouldn't be scanning the news for such a headline.
1. There were no important supply side shocks. There were "expected" shocks and a bunch of panic buying. This was converted into an excuse for price rises with concomitant profit increases.
If it were a supply side shock, you'd see profit rates also falling or staying the same, after profiteering is done.
2. US literally tanked every currency of every economy due to fiscal manipulation, economies which were unable to compensate. China and EU mostly managed. (Where Euro is used, that is.) Everyone else got extra smashed.
3. Fed only defrauded other economies, but USA is also pretty hit by the greed.
> Raising wages with Consumer Price Index (CPI) is dangerous, because it could cause spiraling inflation!
This is only true iff 1) there is no profit margin on the employee and 2) productivity is flat or falling.
1) Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices.
2) If productivity rises then they can pay more, _and_ there ought to be price deflation as supply increase (or some mix of the two) .
> Remember that each dollar a customer spends only requires < $1 to employ. So as employee costs go up there is a cushion before an employer must raise prices.
This logic is broken. Of course there's a margin in there, but to keep the business profitable, this margin must stay. So there's not necessarily a cushion to fall back on.
That's exactly what pressures do though. They shrink the business' margin. It's unrealistic for businesses to expect their opex to remain perfectly stable under market pressures.
Cost of labour, Capital, market forces these all will ebb and flow their profit margins.
Okay, maybe I explained it badly. You said that there's always a cushion. Which would still be true after you raise wages. So you can repeat and repeat and you'll end up with infinite wage for 1$ spent. This quite obviously doesn't work, so the point can't be true. Therefore, we can't deduce the existence or the size of a cushion just by the fact that a product is being sold.
--
I still agree with your general point; in a lot of industries, there's a lot of cushion right now. But there are also companies operating on razor thin margins (especially when competing with cheap labor overseas). At some point, companies will either raise the price (if they can get away with charging more) or shelf the product. They might also do so if they think the margin is to small; they usually don't create stuff for net zero just to keep employees happy. We simply can't deduce from a general argument how close they are to taking either measure.
But what better link to productivity is there than 1) Individual performance compensated (ie work harder get paid more) and 2) Equity share in the business (ie a share of the profits).
In an ideal world that might be true; but we live in a world in which people are not always paid more for working harder, or are unable to attain equity shares. The truth is that there are systematic, and stubbornly persistent, differences in bargaining power between workers and employers.
Clearly the solution to inflation then is to pay workers nothing! If they have no money, there will be decreased demand which should result in lower prices, right?
Belgium does. CPI here is fairly in line with neighbouring countries, but wage inflation is not.
There's some complaints about this by employer organisations, but nothing serious for now. Neither the unions nor the main political parties want the indexation system to change.
I expect the public sector to have to skip one or more 2% indexation steps in the medium term. The private sector will probably have to mostly sort this out on its own.
I find the general acceptance of the idea that increased wages will automatically be eaten by inflation fascinating. If this idea is true, it means the whole system is designed so average workers can never get ahead. In other words, the game is rigged.
Economics is about dividing up scarce resources "dismal science". You can't have the real purchasing power of the average person go up without there being more stuff to divide up (more efficient production, more production, etc).
You can make things more or less equal, but inflation by itself doesn't cause this to happen.
Where do you think it's gone? Complain about the wealthy all you want–their personal consumption of goods and services isn't that much higher than the average.
The very notion of "average worker" seems to disregard the fact that much of the current inequality arises from dispersion in labor compensation itself, not other components of GDP (that are quite residual anyway). If you want workers overall to be better off, you should be pushing for improved economic development and higher productivity.
Anecdotally, I knew a lot of angry engineers in February who found out about their 2% raise and vowed to switch jobs due to this (most likely to another company who just gave 2% raises)
Now, not switching jobs, they don't care much if their next raise will be 2% or 8%, but more if they're considered the 20% of their company that might get fired in the next couple of months
This article is a bit late to the game. When most companies announced 2021 raises and bonuses we were at the very end of 'The Great Resignation' where employees felt the world is their oyster. Looking towards the end of 2022, the reality is very different
I'm usually hate to talk about "narratives" and so forth, but I'm going to make an exception.
I do wonder whether layoffs and the threat of layoffs are being over-reported deliberately to create a sense of fear in order to quell resignations, requests for pay raises and unionization. A quick look at data [1] doesn't seen to show resignations (as of Apr data).
There is an alternative: my friends and I feel happy with inflation-lagging raises in case working hours are decreased. I would gladly agree to earn even less than I do if I could have much more free time.
Indeed. I make enough money relative to my lifestyle that I never really think about it anymore. I could easily get by on half of what I make and would gladly trade it for working 1/3rd fewer hours.
Some people seem to think that you can't raise wages without stealing those wages back with higher prices. Deeply cynical world view, imo. More importantly, its missing the fact that there are other, mitigating, factors that go into inflation, namely productivity.
Also one of the biggest downside of the digital single market of the EU. Can't discriminate so people in Bulgaria, Romania, Hungary etc. have to pay the same price for software, games, subscription services as people in Luxembourg, Denmark etc.
But hey at least the politicians in Brussels are happy
I live in one of those countries and it is as you say, and more, really. Most PS5 games cost upwards of $80. This wouldn't be a problem if we were like Germany, however with minimum wage closer to ~380 euro, and I get paid around 450, it takes a toll.
But that's just for games, gas prices rose exponentially as well as price of used vehicles. The EU also imposed these emission regulations and now our vehicles will be banned from entering specific places unless it has a higher emission standard, which does not correspond to the EURO numbering. This forces you to look for newer cars, which are either more expensive or not as big to fit your needs. Even I will be buying a not so cheap car that is 2008 model, rather than say 2014.
Just one more argument, among many, for the EU to adopt a redistributive system to minimize the economic imbalances within their union. Big part of the reason for the Greek financial crisis of a decade or so ago. An economic union has to be an economic union.
Yes, but we have redistributed systems that keep that from getting too out of whack. And we hear rich states complain about all their money going to poor states, but that is how you keep a union together.
I think the main complaint is that capital (investors) is eating a much too large share of gains in productivity or from other sources, because capital has too much power.
Higher wages can only be clawed back from the shareholders.
Well that is why I think that income (either through minimum wages, basic income cash transfers, of union contracts) should be explicitly linked to productivity not CPI. In an ideal world individual productivity should increase wages proportionate to the increased value produced, but--as you say--that doesn't seem to be happening.
The only deeply cynical part of this is the idea that it's some kind of nefarious plot to steal those wages back. It's not, it's a simple and direct consequence of the fact that in order for people to buy things with their wages those things must first be produced. Right now the world has hit current production limits on critical inputs like energy, raw materials, and semiconductor devices, as well as having labour shortages in many countries. There simply isn't enough stuff for people to be able to buy as much with their income as they used to, and so income is falling behind inflation. Pushing up wages doesn't fix that, it just means that inflation has to be even higher in order for demand to match up with what can actually be supplied. It's not possible to make workers as a whole better off in real terms this way, except maybe by making retirees so poor they're forced back in to work to survive as well.
All else being equal, there is some maximum number of workers that can receive wage increases before inflation in consumer goods rises a tenth of a percent. Imagine that we held a national lottery and the winners of the lotto received a wage increase. Those people could, indeed, buy more.
We need to bridge the gap in the dialog between the lived experience of the individual worker and the statistical experience of the nation's workers.
It's important to understand that inflation is something that happens to value coupons (currency) not value.
Corporations using credit to pay higher wages isn't going to be a stable system. There has to be underlying value in all those higher wages (read that twice because it's the most salient point). People so often confuse value coupons with actual value that we get lines like "Raise minimum wage in order to give people more value".
But the end result is using credit to pay higher wages. Credit just being future value that doesn't exist yet. So eventually there will be a reckoning at some point in the future. Just look at the start-up space. Sky high wages and benefits paid for entirely with credit. Now the reckoning has come and they're in shambles.
A better fix is rebalancing how value is distributed. But this is hard too because people immediately jump to C-level compensation, but their base pay divided among the company is peanuts and their equity pay is ridden with risk (and currently in the dumpster).
It's a very difficult problem overall, and it's why there is always such little policy movement despite everyone saying "You just have to do this one simple thing!"
Edit: I understand if people don't like hearing this, but at least provide a rebuttal.
There's a lot of wanting to paper over underlying issues with things that "sound nice" - why do low wage employees need more wages? Because housing is scarce and very expensive. Adding more money to cover that just funnels it into housing - the underlying problem should be addressed and managed rather than papering over it with higher wages.
But nobody von nobodypants wants to suggest that we enact policies that are designed to lower housing costs, increase supply, and drop the value of single family homes.
Widespread union membership actually made it easier to keep wages down. Union leaders would negotiate wage increases to match inflation, but you couldn't leave the union and find a new job without losing all of your seniority. You were essentially locked into lifetime employment.
In the current system, low-wage workers can bounce immediately as there is no loyalty to their firm in either direction. Workers can very quickly jump to whoever is paying the inflation-adjusted wages, and the government can't keep a lid on income rises by negotiating with a small group of union and corporate leaders.
It doesn't work that way. Nominal pay increases now will be inflationary from current level of prices.
History of wage/productivity isn't relevant to current price/wage dynamics. Just forward rates.
Those past productivity gains were likely captured in lower cost of goods (in real terms), rather than wages. If margins are constant, and wages don't rise, and productivity gains, then cost of goods are lower, which also benefits society.
Inflation is driven by consumption, the bulk of which is done by the lower/middle class. Inflation in construction/housing is an area likely driven by upper class
If the market is working then the mechanism for raises is driven by the relative costs of the alternatives to giving an employee a raise and the value of that increase in labor to the company. Right now the value of the labor to the company is increasing because inflation is increasing what they charge for the end product and the ability to hire a cheaper workers in country is in the favor of the employee but other alternatives (offshoring, machinery/automation) are cheaper for many tasks so there can't really be raises that beat inflation across the whole labor pool right now. This is not the case in cheaper labor countries like Vietnam. I expect lots of factory workers there are getting raises above inflation now.
I'm not convinced "rising wages cause run-away inflation". I think that's just a thing that rich people made up to keep from having to pay people. "Buh buh buh the 70s and 80s!" Suuure, dude. Ignore all that was going on in the global political, energy, and technological markets. It was the wages. Totally convincing.
With massive levels of consumer debt and personal savings at an all-time low, a lot of inflation would be a good thing for the middle class right now. Which is why it's scary to the upper class. Not that they can't afford it. But they didn't get where they were without being greedy bastards who can't let a single penny slip through their grasp.
The key for the lower/middle class is to stop acquiring more debt during inflationary times. Those with fixed loans should keep paying them but not acquire more at higher rates; those with credit card balances are already @#$^$@ as the rates are as high as the usury laws will allow.
IF you do this, you can pay back debt with tomorrow dollars that were earned easier.
Absolutely. The current inflation spike is caused by massive floods of money chasing scarce material resources. We have a financial class happy to apply supply and demand to housing and education, but completely ignoring its effect on food and gas.
Does inflation affect a highly paid worker the same as an average worker? This feels nuanced. If you consider housing, perhaps it does. BLS/CPI inflation doesn’t include that right? Somebody making $100k may be minimally affected by rising food and goods costs. Somebody making $50k may be very affected. A 1% raise for $100k worker is $1000 which may help food cost. A 2% raise for $50k worker would do the same. Are these hypothetical affects included when thinking about inflation?
> The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). Included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls.
Owner imputed rent is basically what an owner thinks they would receive if they rented out their primary residence. IMO it's a flawed metric, but it is a necessary adjustment upward from current cost of ownership since most owners are paying mortgages on home prices from when they bought, so asking them what they currently pay does not accurately reflect the cost of someone newly moving into a housing situation.
To your broader point though, yes, higher earners will be less impacted by inflation in certain areas because there's only so many dollars you can spend on food per year. Would be interesting to see a statistical breakdown of this.
Oh that will never happen. They first flood the zone with liquidity and then flood the zone with immigrant labor, to make both savings and labor diluted. The finance minister of Canada already announced that in the name of modern supply side growth [1]. One thing both mainstream liberals and conservatives are unified on is to slow wage growth.
Oh even Bernie knows how he got c*@kblocked by the mainstream liberals to run for president. Would he make a better candidate and president than Joe? Yes of course, no brainer. Would he make the liberal donor class upset and they couldn’t afford to have him run? 100%.
Whether Sanders would make a better president than Biden is a matter I'm not sure on, I'm reasonably convinced that he would not have made a better candidate. A more polarizing candidate, yes, and more inspiring to the left wing, but not a better candidate overall. Some of his keystone positions like Medicare for All don't turn out to be very popular even among democrats.
Say what you want about the process, but he did lose the nomination. If you think that's just because the establishment was being unfair, think of how unfair the opposition would have been in the general election.
What I worry is that talk about "Medicare For All" and "Single Payer" and other phrases might run into a similar problem the Affordable Care Act had where a lot of people didn't know that ObamaCare was just a nickname for the ACA, and there was a slew of people that said they didn't like ObamaCare but they liked the ACA.
But it's silly: if grocery stores raise salaries to beat an inflation index, they then need to raise prices by the same percentage...raising in turn the inflation index.
Ultimately most of a grocery store's costs are going to be salaries and energy, either directly or at their suppliers, and the energy market is not good right now in terms of availability or cost. Also, if people hope to buy extra stuff with their extra income, guess what that extra stuff will almost certainly require a bunch of energy which will push the price of that higher as well...
You realize that grocery stores have some of the smallest margins, on average, of any business at around 2.2%? [1]
What do you expect them to reduce that to?
With margins that low, don't you think they are already very focused on operating with the absolute minimum number of employees they need?
A friend of mine managed a very busy grocery store for years. It's an extraordinarily difficult business.
Many grocery store chains treat their employees very well, they provide good salaries and training programs. It's one of the few businesses left where you can start out as a bagger and work your way up to senior manager, with all costs paid by the store.
Other than inventory cost, this is their highest cost.
Without knowing what fraction of their costs are wages you can't give a meaningful answer. If 100% if their costs are wages they obviously can't raise wages more than 2.2% without going bankrupt. If 1% of their costs are wages they can double them without meaningfully affecting their profit margins.
Which means they're exposed to any material costs a lot.
So, when a company like BP or Shell raises fuel price by 33%, they're forced to match it or maybe try to get more things sourced locally, cut out middlemen - rather hard.
Usually they'll raise the price a bit more further.
Which means it's a shitty career / sector to be in. There also is a cost to capital, in the form of return on investment (another way to say profit). So in those cases, to pay higher wages, the retail sector would have to raise consumer prices. If they were to decrease ROI, the capital would run away and rather invest in something else.
They will only raise wages and prices if that is the only way to have enough labor to handle their business. Even then, higher prices means lower demand. No free lunch.
Rainbow's prices are competitive, at least they've been in business for
about a century and don't seem in any danger of closing.
The point is that without investors expecting a return there's no ROI.
Grocery stores can pay a living wage without gouging customers and
without investors. It seemed to me that you might have been implying
that without investors there couldn't be grocery stores.
Another factor to consider is that wages and profit returned to
the workers will tend to stay in the local economy longer, contrasted
with ROI which typically would be stored in other investments?
I'm sure if you look closer you'll find that those workers do have some capital bound in the business and that is earning at best a modest return because you have to sum up wage and rent.
Once somebody earns somewhat more than their subsistence wage, they want to invest it into something that brings a return. That won't be these worker-owned businesses. And the market capacity for such companies seems to be quite small.
> 'm sure if you look closer you'll find that those workers do have some capital bound in the business ...
Like what? You'll have to forgive me but I'm not very sophisticated when it comes to economics.
> ... that is earning at best a modest return
So what? Rainbow Grocery isn't an investment vehicle, it's just people coming together to make a grocery store. That's my point: not everything has to be an investment. We can have grocery stores w/o ROI, that charge reasonable prices and pay a living wage.
> Once somebody earns somewhat more than their subsistence wage, they want to invest it into something that brings a return.
Sure! That's the beauty of the capitalist system (I'm pro-capitalist FWIW, I just don't think it is necessarily the best economic modality for every business. The way I put it is, "Capitalism as a tool, an economic API, not an ideology.")
> That won't be these worker-owned businesses.
Exactly!
> And the market capacity for such companies seems to be quite small.
Again, so what? These kinds of businesses generally are not trying to aggressively expand (although some do, like REI, the outdoor equipment stores.)
Just to reiterate, it sounded to me like you were saying that without ROI we wouldn't have grocery stores, and I just wanted to point out that we can have grocery stores with good prices and good wages and no investors or appreciable ROI.
Everything you own is an investment in your portfolio. It's just that some things have shitty returns or lose value. Some don't have any value to resell.
In any case, joining a coop usually means you have to buy some shares in the "company". This may be disguised in some form or another, maybe through withholding some wage initially. But in order to get a share of the profit you need to own a share in the coop. This is what "employee-owned" means. So the employees do have their own capital involved in the company with all the implications: A risk of the shares devaluing and loss of opportunity to do something else with that capital. And if the wages are higher than somewhere else, than they are part of the return on investment. If none of that is the case, it's not a coop but rather a not-for-profit.
That has been tried, and every time it's tried it ends in absolute disaster, because the only way to do it is force people to work and produce goods for less than the COGS.
I know it's not magic, but right now it's not mundane either. I want it to be mundane. Everyone gets raises with inflation. Prices go up, wages go up, and we don't have to worry about falling backwards by sitting still.
Then what's the point of inflation? So people deploy their spare cash in productive ways. That's it. Mundane, no drama, money moves around.
I get that some companies have slim profit margins and can't do this easily, but others can clearly choose to pay their employees more. They just choose not to. This is an ideological thing and not an impossibility. See Gravity Payments.