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The labor shortage is the catalyst for sustained inflation

warrenbisch.medium.com

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Re: The labor shortage is the catalyst for sustained inflation

#41

Post by vvarren »

nickff wrote: post #34
vvarren wrote: post #32

Earlier quoted context omitted.

I am the author and I appreciate your feedback. I actually wrote this piece to push back against the popular opinion that there’s a labor shortage due to “lazy people on unemployment benefits”. I don’t view asset prices skyrocketing as a healthy sign of the economy booming, instead I view it as all the rich people shielding themselves before inflation sets hold. And my argument hinges on working class people being un…

This comment makes it seem like you're using extremely motivated reasoning, and that any conclusions cannot be trusted.

I'll pushback against this point. I noticed that the popular discourse was all about unemployment benefits being the root cause of the labor shortage, when in reality the statistics said differently (i.e., stats from states which had ended unemployment). So I did research to find the true root causes, while I still fleshed out the counter-argument on unemployment. EDIT - also, i'm not a journalist this is just my personal blog and opinions so it's inherently motivated reasoning.

Re: The labor shortage is the catalyst for sustained inflation

#42

Post by vvarren »

novok wrote: post #36
vvarren wrote: post #32

Earlier quoted context omitted.

I am the author and I appreciate your feedback. I actually wrote this piece to push back against the popular opinion that there’s a labor shortage due to “lazy people on unemployment benefits”. I don’t view asset prices skyrocketing as a healthy sign of the economy booming, instead I view it as all the rich people shielding themselves before inflation sets hold. And my argument hinges on working class people being un…

People like to hand wave airbnb as a boogeyman for real estate demand increases, but when you dive into actual numbers you find out it's less than %1 of units in the vast majority of cases. And buying houses to rent them out as 'revenue properties' has been around for a very long time, similar with airbnb style services in the 1800s. If a %1 demand increase causes big price distortions in a RE market, you have much b…

Fair point. This housing boom is largely caused by wealthy investors bidding up the price of single family homes, with AirBnb completely unrelated. There are also some urban-suburban migration dynamics at play. I mentioned AirBnb to point out that this isn't just a new issue. And while vacation rentals have always been a thing, they were formerly centered around vacation destinations. Now, they can be anywhere, and the internet makes it possible to browse and compare prices anywhere in the world. It is now economically feasible to own several vacation rental properties in small cities, which creates a pressure on supply for housing locals. And if you can earn a month's worth of rent in two weeks of AirBnb renting, the price of rent for long-term tenants is either going to go up or you are going to switch to AirBnb.

Re: The labor shortage is the catalyst for sustained inflation

#43

Post by vvarren »

zz865 wrote: post #33
wolverine876 wrote: post #20

I don't know this author, but the arguments that increasing wages will cause inflation, independent of their economic accuracy, are also perfectly tuned messaging for a specific group, the owners of businesses (and the high-level managers). That could be coincidence, but if the beneficiaries are paying attention - and that group is very sophisticated politically - it's probably not. Openly opposing wage increases for…

Maybe but most of the ruling class is more scared of deflation than inflation. Most of the last few years we've been fighting to avoid a deflationary spiral like the 30s. Any coming sustained inflation is a good thing.

Absolutely. In fact, inflation may be the strategy of choice to get the US out of its debt crisis. Ruling class is totally fine with inflation, because it allows them to raise wages to $15, 20, 25, 30 per hour and act like benevolent leaders when in reality wages are just catching up to where they should be after decades of stagnation.

Re: The labor shortage is the catalyst for sustained inflation

#44

Post by pessimizer »

arcanus wrote: post #2

This article does not address the basic economic premise of the substition effect, by which consumers will search for cheaper goods of equivalent value. It would strike me that with massive labor shortages, many businesses will look to technology to replace labor. This could be via AI, or other automation systems. Not an economist.

Workers are cheaper and smarter than machines (even at the vast sum of $15/hr), and expected to maintain themselves.

When a business manages to automate in some small way that allows them to reduce staffing, that's a good thing. It's hard to do. If enough of them do, raise wages again to make up for it. In the year 3021, every 10th person works 10 minutes a day while the robots hum, and with their wages can take care of 9 other people.

Re: The labor shortage is the catalyst for sustained inflation

#45

Post by dotcommand »

rileyphone wrote: post #21

I feel like a lot of this is the bottom catching up to the top. It seems high net-worths are exploding, driven by a rise in public stocks. Real estate is also ballooning. The natural minimum wage rising so quickly is the natural finish to an inflation whip.

Owners ( of assets ) have been making a killing. Pretty much any kind of asset - stocks, real estate, collectibles, crypto, etc. Of course the more you own, the better you did. So the 0.01 did much better than the 0.1% who did much better than the 1%...

The workers on the other hand, not as well.

Re: The labor shortage is the catalyst for sustained inflation

#46

Post by SailingSperm »

Tarsul wrote: post #19

as always the real elephant in the room is that inflation is not bad per se, except for those whose wages don't grow as much as the inflation. And wages for low earners will rise. Thus, we are not really talking about inflation but more concretely about redistribution of wealth, only this time the low earners are getting more from the pie. Not the ones with the capital or the ones who don't work (anymore). As for Ame…

>as always the real elephant in the room is that inflation is not bad per se, except for those whose wages don't grow as much as the inflation.

...Inflation affects savings too. So it doesn't matter that ones salary may increase at the same rate of inflation when the buying power of your savings in diminished by the rate of inflation. Tired of hearing the myopic view that inflation effectively does nothing if wages rise in step, it's just straight up incorrect.

Re: The labor shortage is the catalyst for sustained inflation

#47

Post by rufus_foreman »

wolverine876 wrote: post #20

I don't know this author, but the arguments that increasing wages will cause inflation, independent of their economic accuracy, are also perfectly tuned messaging for a specific group, the owners of businesses (and the high-level managers). That could be coincidence, but if the beneficiaries are paying attention - and that group is very sophisticated politically - it's probably not. Openly opposing wage increases for…

>> I don't know this author, but the arguments that increasing wages will cause inflation, independent of their economic accuracy, are also perfectly tuned messaging for a specific group

Which do you think is a better approach, evaluating arguments on their merits or evaluating them on the basis of who might benefit if the arguments are valid?

Re: The labor shortage is the catalyst for sustained inflation

#48

Post by throw0101a »

reccanti wrote: post #31
wobbly_bush wrote: post #23

Earlier quoted context omitted.

> Thus, we are not really talking about inflation but more concretely about redistribution of wealth, only this time the low earners are getting more from the pie. Can you elaborate on how it is redistribution of wealth for low earners? Genuinely curious.

A labor shortage = an increased demand for labor. If that labor can’t be purchased at the current market rate, then they’ll need to spend more on labor (increase wages), which in theory would come out of the salaries and benefits of the higher ups. We’ll see if that actually happens though. Articles like this are designed to stir up fears of inflation so that they can get people on board with policies to keep wages l…

> […] which in theory would come out of the salaries and benefits of the higher ups.

Or profits for the capital class.

Re: The labor shortage is the catalyst for sustained inflation

#49

Post by throw0101a »

arcanus wrote: post #2

This article does not address the basic economic premise of the substition effect, by which consumers will search for cheaper goods of equivalent value. It would strike me that with massive labor shortages, many businesses will look to technology to replace labor. This could be via AI, or other automation systems. Not an economist.

> It would strike me that with massive labor shortages, many businesses will look to technology to replace labor.

Sraffa went over this in his Production of Commodities by Means of Commodities:

> In essence, Sraffa shows that:

> 1. It is not possible to identify a law that simultaneously determines the wage and the rate of profit because: i) the rate of profit can only be determined by setting the wage (or vice versa); ii) it is impossible to measure capital without also determining prices (including the profit), so it is not possible to calculate the profit based on the value of capital (as its remuneration).

> 2. It cannot be assumed that, as wages increase, labour is replaced by capital, as the value of the capital depends on the duration of the initial investment; considering capitals of different duration, it may well happen that we prefer to replace capital with labour even if wages increase (so-called "return of techniques"); consequently unemployment cannot be attributed to the increase in wages.

* https://en.wikipedia.org/wiki/Piero_Sraffa#Production_of_Com...

Re: The labor shortage is the catalyst for sustained inflation

#50

Post by technologesus »

Why can't people just get green-pilled on the minimum wage already? I've noticed that when topics like these come up people usually say something about how the minimum wage needs to be higher when the existence of a minimum wage is arguably causing/contributing to these problems.

The market sets the price of labor just like the market sets the price of goods. People think that the minimum wage will force employers to raise wages when in reality it just makes those jobs illegal, even if both parties, employer and employee, have an agreement. E.g. what are you going to pay California's hundreds of thousands of homeless people with little to no skills $15/hour to do? Are they really better off with a $15/hour minimum wage working 0 hours and making no money? They have no path up the economic ladder if we chop off the bottom rungs.

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