a thread in which ilx interprets economics and finance, sometimes linen by linen*, and disagrees a lot (probably)

I wasn't suggesting your experience isn't valid, PF, just noting that mine is very different (and it's been a very long time since I've been in a Waitrose)

And a tweet that I meant to add to the earlier discussion:

Nothing to drive me into a murderous rage than spending 30 minutes in a phone queue to perform a task that cannot be completed on the website while a recorded voice reminds me every 30 seconds that the website is convenient and fun.

— Laurie Voss moved to @se✧✧✧@masto✧✧✧.soc✧✧✧ (@seldo) March 1, 2021

^^ definitely one for the technological backward steps thread ...

Yes, agree with that tweet, essentially, and with Andrew F that the point re checkouts is, different people have had different experiences.

Poster Schlosser is probably correct to say that the problem reflects underinvestment in the machines / repair.

I emphasise FWIW that in this particular instance it is not a matter of customer incompetence but of repeated technical failure.

I realise that this thread is not primarily for discussing checkouts (though they are part of 'the economy').

Today I read this Guardian article on inflation and pay.

https://www.theguardian.com/business/2022/dec/11/it-is-soaring-energy-costs-fuelling-uk-inflation-not-humble-pay-rises

As far as I can see, it states that as pay is lower than the rising cost of items, pay rises would not be a bad thing.

I agree with that, except that I'm not sure where employers would get the money from.

Does it strike anyone that the labor shortage supposedly behind inflation (at least in the US) is artificial? Are immigration laws and policies getting in the way? Is labor not sufficiently empowered? Are price and wage expectations always in sync and a matter of political and economic power?

There is a class that can weather changes in prices.

a lot of jobs are shitty and low-paying, and people would prefer not to work shitty low-paying jobs if they don't have to? ... all i know is that I had a bunch of friends who were making way more on Covid unemployment than they ever had in their lives and it gave them a new perspective ...

https://www.aei.org/wp-content/uploads/2021/01/cpi2020-884x1024.png?x91208

the commodities book i mentioned upthread (the world for sale by javier blas and jack farchy of the FT) is pretty boring tbh

College Textbooks.

Those avaricious academic authors are the true financial winners of the last 20 years.

(Open access publishing for publicly funded research and scholarship is overdue and would help mitigate some of the costs, I think.)

(Price changes seem to have increased more rapidly for emblems of wealth, and the way they are priced seems more capricious (and unpredictable?), but I wonder if wages in those sectors have also increased and if they are as responsive to demand. Some seem opportunistic for rapid sector shifts vis a vis training workload.)

(A horrible example seems to be the restaurant industry where workers in fine dining are treated much worse than in chains but in which the value of the experience seems drastically overpriced or unaffordable.)

This Guardian article states that we could be paid more, and discusses potential effects.

https://www.theguardian.com/commentisfree/2022/dec/16/strikes-are-telling-us-something-low-wages-over

It reminds me to ask here:

Inflation goes up, say to 10% - meaning that my packet of spaghetti or tea is 10% more expensive. (I don't know why.)
Meanwhile pay doesn't - people are expected to accept a 3% pay rise, say. And the demand is: pay rises should match inflation.

That sounds good and I'd like to have the extra 10% pay. Or any pay, the way things are going.

But - how can employers afford it? Have they gained 10% more money through the 10% inflation - which they can then pass on in 10% more wages?

In some sectors (like education), this is not the case. Maybe in others it is?

I'm puzzled re: how employers are supposed to raise pay to match inflation.

Public sector pay rises could be met mostly through increases on big business taxes potentially targeting the sectors in which there's evidently broad enough profiteering alongside inflation (which we have been experiencing for a while). Private sector pay rises (where wages are frequently much higher than a public sector equivalent of that job) depend a lot more on the extent to which tax rises affect those profit margins (or investing sure) plus where the general market action is, but they're not as crucial (yet always more likely in our market-led realm).

Because they raised those prices 10% to take greater profits rather than because their own costs increased.
xp

To be fair that’s not true in all sectors but it is true that this bout of inflation is much more about profit-taking than most people realise. Witness record profits for car makers, oil companies etc

So, employers *are* making more profit due to inflation?

And inflation is due to companies putting up prices to make more profit?

Then, someone else could easily undercut them in price (as the price rise is a choice, not necessary)?

In some cases profits have also soared as a result of the relative return to normality post-pandemic and the supposed balancing act of increasing prices to combat demand exceeding supply in the wake of this (and also war if not also other 'unusual' factors e.g. climate change) producing both desired and undesired effects. Undercutting is not necessarily viable or preferable as competitors tend to be affected in the same ways (by those aforementioned supply/demand issues in some cases but also yes the same greed and cynicism in others).

I don't think I see why a return to normality would make prices higher, rather than lower.

the notion that competition lowers price is a largely right wing libertarian fairy tale i think

Because it's a return to normal levels of demand which the (ability to) supply has been slow to catch up to. This can affect the cost of doing business e.g. how much you can ship goods around and how long it stays in ports for (while at the same time your fuel costs are up). xp

In modern economies is it fair to say that cost of living is a by product of government policy subject to foresight?

But goods in the supermarket, or fuel, are not more in demand now than they were in 2020. People needed to eat and stay warm then also.

In those cases it's more the supply that is affected. Not necessarily of the goods themselves but of the means to produce and distribute them - staff shortages (and subsequent wage increases to try and rectify this) and disruption to fuel supply as attempts are made to 'switch supplier' (from Russia - and you don't have to be a direct customer to be affected by that) in particular.

(interesting article about 529 accounts in the NYT today vis a vis debt relief for student loans)

In those cases it's more the supply that is affected. Not necessarily of the goods themselves but of the means to produce and distribute them - staff shortages (and subsequent wage increases to try and rectify this) and disruption to fuel supply as attempts are made to 'switch supplier' (from Russia - and you don't have to be a direct customer to be affected by that) in particular.

Then there's also the issue of "food waste" and regulatory efforts to combat this

the times article linked in that is interesting and relevant for this thread, i think: https://www.nytimes.com/2022/06/03/business/economy/price-gouging-inflation.html

I think this is an apposite point:

"Market concentration is a longstanding problem, yet we've had close to no inflation for two decades," said David Autor, an economics professor at the Massachusetts Institute of Technology. "So it cannot be that market concentration suddenly explains inflation."

This is the general problem with any model of inflation that is based on greed or profit-taking. Its hard to use that model to explain why an inflation regime would suddenly shift. Did everyone suddenly get greedier? How would it work as a practical model that could be used to predict inflation? I suppose economists could survey CEOs to see how greedy they are feeling at any particular time. And then an uptick in greed would then presage a bout of higher inflation. Its hard to take this seriously.

I think this is an apposite point:

_"Market concentration is a longstanding problem, yet we've had close to no inflation for two decades," said David Autor, an economics professor at the Massachusetts Institute of Technology. "So it cannot be that market concentration suddenly explains inflation."_

This is the general problem with any model of inflation that is based on greed or profit-taking. Its hard to use that model to explain why an inflation regime would suddenly shift. Did everyone suddenly get greedier? How would it work as a practical model that could be used to predict inflation? I suppose economists could survey CEOs to see how greedy they are feeling at any particular time. And then an uptick in greed would then presage a bout of higher inflation. Its hard to take this seriously.

i think his point was that companies have had the chance to increase profits by raising their prices for consumers for a long time now, but have not until the pandemic. the article offers an explanation for this so that you both can be right:

For example, one reason rising concentration didn’t translate into higher prices in the decades before the pandemic appears to have been that corporations widened their margins by squeezing suppliers and resisting wage increases.

I work for Patrick Cargill

For example, one reason rising concentration didn’t translate into higher prices in the decades before the pandemic appears to have been that corporations widened their margins by squeezing suppliers and resisting wage increases.

this can work as an argument for one industry, but it isn't a coherent macroeconomic argument for broadbased inflation. if everyone is "squeezing suppliers" i.e. forcing suppliers to pay low prices, then everyone is paying low prices and profit margins are low

Who is Cargill?

I decided to look it up and I find that it is a food company in Delaware.

No, I don't work for that company and have not heard of it before.

If I understand o. nate's post, I agree with him in wondering why, if inflation is driven by greed, it hasn't been going on more for longer.

Why does it become intense now?

My other question was: can companies afford to raise workers' pay to match inflation?

The answer given was: yes, because companies are making money from inflation (eg: spaghetti costing more so Sainsbury's makes more).

However, this is not true of all employers. The fire service makes no money from inflation but its workers' pay still falls behind inflation. Can the fire service afford to pay people more?

I suppose you then need to say that the government pays the fire service, and the government's money comes from taxation. So has the government made more from taxes due to inflation? Not that I know of.

Trust by Hernan Diaz had to do with stock market manipulation when economic power becomes concentrated, I think. I think power generally translates into abuse of power in tempting situations, such as when one stands to make a profit.

Regarding the chart on selected US consumer goods and services and average wages, one trend that I notice is that private equity looks for sectors that the wealthy use to differentiate their class and then develop services or products in those sectors that allow them to make huge profits without passing them on to workers in those sectors. Coincidentally, there was a NYT article about trends in child care along these lines not long after the chart was posted. It also mentioned Manchin's interference in passing the child care bill, suggesting he was motivated by ties to the high end of the industry, which saw restrictions on future profit. I think in South Korea, there was an incident of fraud related to aging comfort women who were in care but not being treated in accordance with their exploitation for donations might suggest. Elder care could be exploited in societies where children are traditionally responsible for the care of aging parents.

I think inflation signals stock market behavior that may be risky and leads to exploitation when times change.

However, this is not true of all employers. The fire service makes no money from inflation but its workers' pay still falls behind inflation. Can the fire service afford to pay people more?

I suppose you then need to say that the government pays the fire service, and the government's money comes from taxation. So has the government made more from taxes due to inflation? Not that I know of.

this must be one of those marked differences in UK vs. US economics ... in the US (at least in most major cities) workers for the fire service tend to be very highly compensated compared to other government workers. They also tend to be one of the few remaining categories of workers in the US that receive pensions.

Government also makes money from service fees, for example, permits and fees for inspections required for permits. ... The Fire service where I live is fairly "proficient" at monetizing these services.

"workers for the fire service tend to be very highly compensated compared to other government workers"

That sounds relatively fair, as their job is more dangerous than anyone else's.

In the UK:
"Firefighters and control staff have voted to reject a 5% pay offer in a result that FBU leadership say displays “remarkable strength of feeling”. A strike ballot will now be held."

https://www.fbu.org.uk/news/2022/11/15/firefighters-reject-pay-offer-and-strike-ballot-dates-announced

Someone in the NLR has written about inflation.

"the grammar of the new inflation is not confined to the conjunction of the pandemic, the material tensions arising from the green transition and the war in Ukraine". It is also "a slow-motion financial crisis" https://t.co/N2B7oUsb1W via @newleftreview

— Cédric Durand (@cedric_durand) December 22, 2022

It seems to me relatively sensible for government to meet unions' pay demands (nurses, ambulance drivers, rail workers etc).

I want that to happen anyway because I support trade unions and oppose the government. But I also think: given how much government has spent on other things (eg: wasted money on botched procurement during lockdowns), are these pay increases that much to them? The rhetoric of 'we can't afford these irresponsible rises' doesn't ring very true to me.

Meeting these pay demands would also end strikes and improve NHS function, which would be relatively popular with voters.

Further, giving people more money would presumably encourage spending, eg: on property or in services and shops, and this would be 'good for the economy', good for restaurant owners etc.

I find myself thus positing that government's reasons for not meeting the pay demands are more nefarious and connected to eg: trying to break up the NHS.

Or is it just that the kind of bad people in government hate the kind of good people in the NHS, and can't bear to give them anything?

yes/both also hanging all problems on organised labour ideally turning "the public" and other workers against industrial action in general and in future

cost, efficiency etc are things that can be invoked to justify whatever but the tories don't seem to care too much about them except for that purpose

Yes, I agree that the other reason for refusing these demands is to be involved in a fight with the labour movement for the sake of it, because they think this looks good.

I still think this is probably 'bad economics' even on their own terms, and 'bad society', even if it is 'good (that is, evil) politics'.

I suspect the government is also worried that if it “gives in” in one area - rail, the NHS - it will embolden the rest of the union movement. Which is probably true! And the reason the government thinks this would be bad is because it thinks it can’t “afford” the pay rises (clearly untrue, as the pinefox suggests) and is probably also still worried about a wage-price spiral. And finally of course is implacably opposed to the idea of worker control in general.

The wage-price spiral idea is one that I, predictably, don't understand.

If people are poor and their pay is falling behind the cost of living, how is paying them more going to make things cost more?

And things are already costing more anyway. So worrying that you're going to increase the price of things would seem, at best, to be worrying over the door of an empty stable.

No comments on the merits of settling strikes, but the Govt is brassic:

In November 2022, the public sector spent more than it received in taxes and other income, requiring it to borrow (public sector net borrowing excluding public sector banks (PSNB ex)) £22.0 billion, which was £13.9 billion more than in November 2021, and the highest November borrowing since monthly records began in 1993.

Well I have one main comment: it’s ludicrous that the Govt places such emphasis on “market forces” and yet the moment when they are presented with the evidence of thousands of vacancies across the public sector, people leaving and recruitment difficulties, and other evidence that pay is too low, they suddenly lose their market philosophy.

It’s the “skills gap”! Just can’t find qualified people willing to work for these wages! It is a mystery!

Luna I’m far from an expert but my understanding is that public debt in the UK is just not something worth worrying about rn