Inflation Discussion: the Elephants in the Room


News media in the past week have been overwhelmed with the twin threats of inflation and recession. As they should be. In case anybody didn’t notice, we have just borrowed our way out of a pandemic and are in the middle of buying ourselves out of a war. The cost for these two events will be hanging around our necks for quite a while. But the main difficulty everyone is talking about is how to deal with the labour shortage without causing inflation.

“Now It’s Our Turn”

The pandemic brought to light a basic mismatch in the labour market: workers in certain industries weren’t getting paid enough. Once the restrictions were lifted and business came back, those workers had found jobs elsewhere, and they didn’t return. The obvious solution, of course, is to offer higher salaries. But raised wages means higher prices means inflation.

I can’t help but be suspicious. As I listen to the media coverage, I detect a pair of very large elephants hanging around in the room, and everybody keeps ignoring them. Perhaps if we brought them to the forefront, we might find some better solutions than the hand-wringing that seems to be the only response so far.

First Problem: Price Gouging

When the media talk about salaries and rising prices but only look at it from the point of view of lower-level wage earners, I smell a rat. Especially in these days when a CEO’s salary can be 400 times the worker’s, I wonder whether the conversation is being quietly steered aside from more profitable topics.

For example, it seems to have escaped public notice, but all through the pandemic stock prices were rising. When the stock market goes up, everybody involved makes money. Now the market is “correcting.” When the market goes down, the big investors sell short and make money. And hasn’t anyone noticed that during the present gasoline price increases the main fuel producers are making record amounts of money?

A Radical Solution

I can’t help but speculate. If raising the wages of the underpaid causes inflation, wouldn’t lowering the wages of the overpaid have the reverse effect? What a revolutionary thought!

Second Problem: Retaining Employees

People who look at the economy from a business point of view always consider that the way to keep more workers is to pay them more. And up to a point, this is true. However, people who research job satisfaction find that, beyond a reasonable rate, salary drops off as a factor. Being treated well and feeling valued play a much larger role in the decision to stay or leave a given job.

Another Radical Solution

Treat your employees better. Everybody has stories about ogre bosses and their autocratic ways.

I can’t help but notice another coincidental juxtaposition. At the same time as we are worrying about keeping employees, we have the media filled with reports of government big-wigs, high-ranking military officers, and rock stars being charged with abuse of those working under them. And nobody seems to be able to do anything about it.

Why not? Because there is an underlying caste system in our society that glorifies rich, educated white males. They are in the driver’s seat, they have been since the Middle Ages, and they continue to use their advantage to stay there. They glorify competition because they’re good at winning the games they have created. They depend on the stock market and capitalism because they have honed that system to make money for themselves. Worst of all, they have the support of a large number of their victims because those victims are indoctrinated to believe in their system.

The Bottom Line

Two problems with the same solution in the long run.

  1. Fight inflation by dealing with the real cause: profit-taking at the highest levels.
  2. Keep employees on the job (and also increase productivity) by treating them better.

Until we level the playing field, the rich will keep getting richer and the poor will keep getting poorer. And keep absorbing the pain of inflation.

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