The problem is now that the cost of housing has more than doubled over the past ten years and now we have an inflation problem too. They can't double the pay and, even if they could, this would just be adding fuel to the fire.
How this will play out, I don't know, but maybe we don't need multiple versions of the same kind of business and only those who can get the staff will survive and prosper?
You don't know the half of it. I got stuck in this trap when I was a teenager:
https://www.theguardian.com/business/2017/aug/30/poundland-w...
It was outrageous.
This is also a failure of the Fed to raise interest rates when times weren't bad. Interest rates should have been at 2% before inflation started taking off, but people were addicted the cheap, almost free money but they didn't want to give it up.
This works because having interest rates at the rate of inflation will cause more people and businesses to slow down their spending as they feel like they aren't losing money by not spending it.
I believe the Keynesian approach to fix high inflation is to just raise tax rates to get money out of the economy.
I believe this doesn't work as well because the extra tax dollars are then spent by the government, which are them competing for goods and services, though probably in different areas, but it's still keeping that money in the economy which will keep prices high. The only way I could see this working is if the extra tax money was used to pay down debt, which I doubt anyone in the US government would do.
Build some infrastructure with these taxes. In this case, also massive investments towards improving productivity. That’ll put the money to good use and at least prime the pump for recovery, and private businesses do not seem willing or capable of doing that.
But you also have the problem of those dollars then going towards labor and materials, which will keep demand there high, continuing inflationary pressure in those areas.
Unfortunately it seems to be a pipe dream in most countries I know.
> But you also have the problem of those dollars then going towards labor and materials, which will keep demand there high, continuing inflationary pressure in those areas.
Yes, and I am not sure there really is a solution to that. I guess hiking interest rates would cause a shift from debt to the new income stream, but it would be complex as ideally you’d still want lower rates to stimulate investment. Probably an increase in corporation and capital taxes as well, but then I might as well wish for a unicorn.
I'm usually a Keynesian, but in this case, i think we should jack up interest rates and deliberately tank housing and asset prices, then use large scale infra investments to stop the unemployment rate rising too high.
Easier said than done, i suppose.
I am mostly with you, but “deliberately crashing housing and asset prices” is political suicide and I don’t see it happening. Interest rates are a good start, though.
Also, I think that considering the current labour shortages the risk of unemployment getting out of control is limited.
I do fear the fed isn’t doing what it needs to because they’re afraid of being seen as political, one way or the other. I hope we don’t have to wait until after the midterms for them to grow a pair.
I agree and I wish this mindset would disappear. Of course a central bank is political. It’s job is to keep a working economy. There are few other institutions that affect directly so many people every day, it’s the definition of politics. They might not like the optics, but each of their decision is just as political as one from any government agency.
There is some sense in insulating them to some degree from short-termist elected politicians looking for a windfall, but their smug “I know better” attitude (and the lack of accountability) is deplorable.
Sorry, that was a bit of a rant, but we should remember that a central bank is there to serve a country, not the opposite.
The Fed tends to be restrained because the monetary policy levers they have been given are deliberately a blunt instrument with extreme overshoot dangers, especially when all the indicators aren't pointing the same way, and managing the economy requires the much more targetable tool of fiscal policy controlled by Congress as well as monetary policy.
(That said, the Fed is pushing, by historical standards, really hard on its levers, raising rates at a pace not seen since 1980.)
If they raise the interest rates anywhere close to the rate of inflation a lot of the 3rd world will have a Sri Lanka style crisis.
Seeing employees as nothing more than a cost center is not new.
Unions were busted, pensions ransacked, through decades of leveraged buyouts, intentionally torpedoing worker savings.
This was no accident; in the US, just like Brexit, it was intentional on the part of business and legislators. Consolidated power over agency is their goal.
If you are in a competitive market and you were able to raise pay, your competitors will probably be able to raise pay too, and so they will also raise pay to fill their shortages. Someone will raise pay to be higher than yours and then you are the one gaining a shortage to provide a worker to fill someone else's shortage.
Net short term result: you and your competitors still have shortages, but are now all paying more, and are possibly in a feedback loop that will continue to raise pay without fixing your staffing problems. You may have to raise prices, and then not only did raising pay fail to solve your staffing problems it increased inflation.
Whether or not that is also the medium or long term result depends on how easy it is and how long it takes for the new higher pay in your industry to bring in new workers to your field instead of just shuffling existing workers between companies.
Even if it does bring new workers to your field if those come from other fields it might be shifting the shortages to those other fields, which might then go through their own cycles of raising pay that only accomplishes shuffling shortages between them.
You end up in a situation where if supply is constrained but demand is strong enough and companies can, in the short run, raise prices but not have to employ more people which mitigates downside risk of adding additional cost structure and commitment of new employees. Not a great long run strategy though these are strange times.
Employers are complaining because they are competing against a benefits system that theoretically acts as unemployment insurance and encourages people to find work, but in reality is currently just giving out free money. It's a sort of real time experiment in UBI for the lower paid classes. The result is predictable: many firms cannot compete against the state paying people not to work.
Lockdowns have had all sorts of weird side effects like this. COVID became a sort of wildcard justification for anything at all, and government departments used it to do whatever they secretly wanted to do anyway (give out free money without the "being mean" parts, working from home even as backlogs at their departments soar, etc).
> "The result is predictable: many firms cannot compete against the state paying people not to work."
Maybe many firms could stop abusing employees to extract money for record profits and instead compete on being decent places to work where people want to work because they feel like they are adding value to the world rather than being exploited and trapped.
Management Consulting is the fourth most profitable industry in the entire UK, how are so many companies so badly managed??
https://www.ibisworld.com/united-kingdom/industry-trends/mos...
If renting a half-decent flat cost £1500 per month, I don’t see how we can expect people to work for less than £2500 per month.
We have working people in the UK in the situation where they would be delighted to have to choose between "heat" and "eat".
Because now they are forgoing both. FFS, children are stealing toilet rolls from their schools because their families can't afford to buy them.
Well, except for politicians. They got to say they "fixed" the "problem" of people mooching off the system. Except what this actually does is create a bureaucracy that people have to specialize in, so only very dedicated moochers will know how to use the system at all. People who use the system for its intended purpose will not know what to do in order to navigate all the government bureaucracy around it.
Lots of employers were used to buying into a labor market in which their workers had zero negotiating leverage besides minimum wage. This is deliberate. If the labor market had consolidated or changed in such a way as to naturally make prices rise through market mechanisms, then those employers would be calling on the government to manipulate the market the other way. In fact, that already happened: the whole concept of trade liberalization was weaponized to do exactly this to union labor.
Speaking of, we also need to account for the fact that China has shrugged. The torrent of cheap-as-free overseas labor is now not nearly as free and comes with significant problems; i.e. being tied to the CCP's political priorities and frequent lockdowns as a result of China's COVID-zero strategies. So even if we weren't running a UBI experiment, we'd still see shortages and wage inflation, because the country we built the entire global economy around is no longer providing what it used to.
> working from home even as backlogs at their departments soar
There's no evidence that this affected efficiency?
https://www.telegraph.co.uk/news/2022/06/02/benefits-britain...
Firstly, he tackles the bogus claim that it's to do with Brexit:
"Immigration has bounced back. There is no Brexit-sized hole in our workforce; not anymore. Immigrants now account for one in five workers in Britain, the highest ratio ever."
Then he tackles the definitions used for unemployment stats:
"The low unemployment claim is a mirage. Britain has, in fact, been suffering a period of mass joblessness as big as any in our recent history. The proportion of people who are neither in work or looking for it is higher now than it was in the mid-1970s. More than five million people were claiming out-of-work benefits at the last count – a figure as big as the population of Scotland. But many of them don’t count as unemployed, because they’re not looking for jobs. So – presto! – they vanish from the national debate."
Parts of the UK have become massively dependent on benefits:
"In Blackpool, official figures show 26 per cent on out-of-work benefits. In Middlesbrough it was 23 per cent, in Hartlepool 22 per cent, in Manchester, it’s 18 per cent."
Why doesn't the Universal Credit system fix that? It's as I said:
"Why? How did we get here? How did Universal Credit, the flagship reform of the Cameron era, start to produce the problems that it was designed to solve? It was created with strings of conditionality on welfare payments, with sanctions imposed if people turned down jobs or missed face-to-face meetings. During lockdown, the conditions were abandoned – and never properly restored. So the new system has started to trap people in welfare as surely as the old one did. It has started to become an issue in Cabinet."
> More than five million people were claiming out-of-work benefits at the last count
The government thinks that's 1.5m.
https://www.ons.gov.uk/employmentandlabourmarket/peoplenotin...
edit: look, the problem with basing solutions on a nonsense assessment of the problem is it doesn't work. We've been round this with disability benefit; it was made much harder to claim by simply rejecting a very large number of valid claims upfront. A bogus appeal process through ASOS was put in place to further deplete people's ability to claim. However, once the claims got in front of a real court or external appeal, the majority were upheld.
There isn't a hidden army of the idle.
> Immigration has bounced back. There is no Brexit-sized hole in our workforce; not anymore. Immigrants now account for one in five workers in Britain, the highest ratio ever.
There are 33 million employed people in the UK. One in five is 6.6 million.
There are 6 million foreigners in the UK: https://www.ons.gov.uk/peoplepopulationandcommunity/populati...
We must deduct that Mr. Fraser Nelson is describing an economy where newborns work, probably aiding 600’000 foreign zombies. Or one is still an immigrant after 10 years and even after naturalisation?
> The proportion of people who are neither in work or looking for it is higher now than it was in the mid-1970s.
Employment rate is at 76%, as high as Germany and higher than in the mid-70s. https://tradingeconomics.com/united-kingdom/employment-rate
I don’t have time to research the benefit data but it’s not necessary because Mr. Fraser Nelson has totalled the bullshit meter. Maybe these work lazy Britons should get a job as Telegraph editorialists? They don’t publish articles anymore, so I’m sure they need some help and the bar doesn’t seem too high.
The bulk of the growth in claimant count came from Feb 17 to Mar 20 - it nearly doubled over that period, when conditionality of benefits was in full swing. It simply does not follow that conditionality reduces claimant count.
In any case, conditionality was reinstated in July 20, and unless you or Fraser can precisely define how conditionality was "not properly restored", I'm going to take the government's word on it.
Per his tweet, https://twitter.com/FraserNelson/status/1530206631195201536/..., we can see in his computation of those on out-of-work benefits he includes pension credit (what demographic receives this, I wonder?), and 1.7M people on INCAP - the various disability allowances, the majority of whose claimants will, due to the closure of the old schemes to new claimants, be on the modern ESA benefit where eligiblity is assessed by an independent healthcare professional. For example, as my mother withered away in her final months, bedbound with oesophogal cancer, she became eligible for ESA, and contrary to one of your other comments to another poster about the 5 million, she most assuredly was dying.
Note also that UC is in turn becoming a replacement for ESA. He did not avail himself of the facility on Stat-Xplore to breakdown those aggregated UC figures into the "out-of-work" and "no work requirement" figures - they are 2,103,346 "out of work" and 1,399,843 "no work requirement" - no work requirement being defined in https://www.gov.uk/government/publications/dwp-statistical-s... as "those who are not expected to work at present, such as those for whom Health or caring responsibility prevents claimant from working or preparing for work"
Thus, the 5 million figure is inflated by a mere 3.1 million people who are either retired or who have been assessed as having some inability to work.
I would suggest critically examining the source stats instead of uncritically accepting the interpretation of right-wing journalists with an agenda, though I fear you share said agenda...
No. It's exactly the same condition, but people are telling the story from different points of view.
Workers aren't getting paid any more, and with inflation, it's effectively a lot less.
Companies who scoop up cash via inflation just can't find workers who want to work for what the companies are willing to pay.
This is the result of neoliberal policies leading to a return of robber barons.
I view it as a good thing. Even in the US, I see stores/restaurants closing earlier, closed on Sundays, and job advertisements on the side of buildings advertising pay rates. That means the people at the bottom are finally gaining negotiating power.
It seems to me that decades of industrial policy have been aimed at clamping down any means to demand nominal wage increases, especially through industrial action, so we are now stuck in a low-wage staff shortage situation; this would be a great time to invest capital in productivity increases, especially while interest rates are below inflation, but British management culture is too dysfunctional for even that. And the government are not going to do anything useful because they're busy competing for the top job, egged on by a press who don't care about industrial policy or wages.