Why the Fed wants corporate America to have a hiring freeze

Post by amluto » Mon, May 30, 2022, 11:17 AM UTC

s1artibartfast wrote: post #5

kalupa wrote: post #4

So, wealth is getting redistributed downwards because of inflation. Am I getting that right? Wouldn’t want that to happen.

I think that is really hard to say. Depending on where the salary growth and demand is, it could easily worsen inequality. If salary for white collar workers and inflation goes up too much, employing blue collar work becomes unprofitable and those workers get locked out of the labor market.

I think this is likely a bit backwards. If the white collar salaries go up too much relative to blue collar salaries (or more generally if salaries become excessively widely distributed), then employing low wage workers becomes _cheap_, at least in a relative sense. This is fine for the companies that want to employ them, but it means that those employees’ incomes may increase much slower than the prices of anything they want to buy, and they get locked out of the market for consumer goods.

Post by s1artibartfast » Mon, May 30, 2022, 5:15 PM UTC

amluto wrote: post #31

s1artibartfast wrote: post #5

Earlier quoted context omitted.

I think that is really hard to say. Depending on where the salary growth and demand is, it could easily worsen inequality. If salary for white collar workers and inflation goes up too much, employing blue collar work becomes unprofitable and those workers get locked out of the labor market.

I think this is likely a bit backwards. If the white collar salaries go up too much relative to blue collar salaries (or more generally if salaries become excessively widely distributed), then employing low wage workers becomes _cheap_, at least in a relative sense. This is fine for the companies that want to employ them, but it means that those employees’ incomes may increase much slower than the prices of anything…

I think we are saying the same thing.

You are just giving the hypothetical answer where blue collar salaries stay low and I am giving the hypothetical where blue collar salaries rise.

If blue collar wages stay the same, then yes labor costs are discounted.

If they raise, it may make sense to eliminate the position via automation or shipping the job overseas.

Wages are generally sticky, but nobody will take a job if they can't feed their family and pay rent, so inflation will eventually drive the wages up or make the position obsolete.

Re: Why the Fed wants corporate America to have a hiring freeze

Re: Why the Fed wants corporate America to have a hiring freeze