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November 30, 2005
Inflation greater than income growth destroys incentives to work
The good news is that the average paycheck — in theory — should keep up with inflation, which is expected to be about 3% next year.The bad news is that most employees will get less than 3.5%. That average is driven up by very high raises — as much as 9% — expected in a few fields with acute staff shortages, including nursing and financial services.
"If you're not in a high-demand position or covered by a union agreement, maybe you'll get 1% or 2%, if anything at all," said John Putzier, president of FirStep Inc., a Pittsburgh-area human resources firm. "It's going to be spotty."
The sad part is I can probably calculate my exact inflation as well as my exact income change; and wince when I do it. My US$.50/hour raise leaves me with less purchasing power than I had last year. Fortunately our congress people won’t have to deal with this indignity. Congress gets an annual cost of living adjustment...
Now, if it’s not inflationary for congress to fluff their own salaries, why is it inflationary for the minimum wage to go up? Not to mention wages which-- *ahem* like mine-- are tied to minimum...
Posted by Andrew at November 30, 2005 11:05 AM
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Comments
It won't be any comfort to you, but the inflation figures are considered by most economists to be unreliable, because they have no way of including the fact that the things you buy are better than they used to be. To take an extreme example, my cell phone has computing power that would have cost millions in the 60's, a CCD that would have cost millions in the 70's, video, e-mail, games, calendar, address book, and clock (I don't even wear a wrist watch any more). And SBC just urged me to take a faster DSL connection for less money. None of this gets captured in the inflation stats...
And the problem with minimum wage laws is not that they are inflationary, but that they increase unemployment among those who are not worth the minimum wage. Ie: young, male, poor, minority. The extreme version of this is countries like France, where poor ghetto boys probably have less than a 50% chance of EVER being seriously employed.
I would LOVE to live in a world where bookseller is a career offering prestige and dignified affluence, but it ain't gonna happen. Your job is a starter job, and you will move on and leave the niche open for some other smart young student...
Posted by: John Weidner at December 1, 2005 09:47 AM