Why Wage Inflation Will Accelerate

Of Two Minds ^ | Charles Hugh Smith

[blam]

The Fed has created trillions out of thin air to boost the speculative wealth of Wall Street, but it can't print experienced workers willing to work for low wages.

The Federal Reserve is reassuring us daily that inflation is temporary, but allow me to assure you that wage inflation is just getting started and will accelerate rapidly. As I noted yesterday, the Fed can create currency out of thin and funnel it to financiers, but the Fed can't create experienced, motivated workers out of thin air or entrepreneurs with the chops to launch and sustain real-world enterprises.

Let's start with a funny little thing called competition, which has been pushing wages down for the past 50 years. Globalization means you're competing with every other worker on the planet for jobs in tradable goods and services, and mass immigration and relatively high birth rates means there have been more potential workers than secure jobs.

Competition for paid work has been wonderful for global corporations, whose profits have soared five-fold thanks to labor arbitrage, also known as offshoring, where companies can pick and choose locales with the lowest cost labor.

There's also been fierce competition for campaign contributions, as the cost of securing re-election has soared into the millions or tens of millions for congressional seats, and the bottom 90% can't compete with the top 0.1% in terms of lavishing millions on politicians who have become keenly attuned to the "needs" of their corporate handlers.

Thanks to global labor arbitrage and the outright purchase of our pay-to-play political system, capital has skimmed $50 trillion from labor over the past 45 years. It's all quantified in the RAND Corporation's 2020 report Trends in Income From 1975 to 2018 that documents the $50 trillion that's been transferred to the Financial Aristocracy from the bottom 90% of American households in the past 45 years.

Time magazine's article The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90% -- And That's Made the U.S. Less Secure lays out the key role played by our political leadership:

No, this upward redistribution of income, wealth, and power wasn't inevitable; it was a choice-- a direct result of the trickle-down policies we chose to implement since 1975

(snip)

[blam]

B of A: “Transitory” Inflation And Supply Chain Imbalances Are Hitting Autos Hardest

[Reno89519]

We need some serious wage inflation. But to sustain it we need to kick out all illegal aliens and H1B workers. Let’s turn these American jobs over to Americans and let the market set the rate.

[Pollard]

Need to quit importing crap from china and the like. Bring those manufacturing jobs back here. Our ever growing Hispanic population, blacks and poor whites would do well in that work. I’ve done it. I ran a blister pack machine packaging hair brushes. It’s boring but not difficult. That was through a temp agency. My first job was tearing open new packages of sheets to repackage in K-Mart packages, 2nd shift, $4.00/hr when I was 17.

Then there would also be higher paying jobs building and maintaining the machinery for manufacturing. Building houses for the new manufacturing workers. More service work too.

[glorgau]

Let’s turn these American jobs over to Americans and let the market set the rate.

Yep, the Americans have rights and can negotiate or walk if it's a bad deal. H1Bs and illegals, not so much.

[PGR88]

I know CH Smith’s writing, so he is fully aware of it - but this article forgets to mention the elephant in the room - Nixon’s decision to remove the link between the USD and gold. The fact that money can be printed, and debt created, with no automatic check on it, means “first handlers” of new money (wall street, government and asset holders) benefit at the expensive of wage earners, whose wages and earnings are destroyed.

Biden’s $multi-trillions in stimulus is a perfect example - massive debt which will grow government, pay for leftist social-engineering and be spent on political and crony payoffs.

[PGR88]

My first job was tearing open new packages of sheets to repackage in K-Mart packages, 2nd shift, $4.00/hr when I was 17.

My first "real" job was $2.80/hour at 16 years old, helping the local butcher cut up sides of beef for sale in his shop. That's now done by huge Agri-corporations in Mexico or at giant factories staffed by central Americans or Somalis in the midwest.

[9YearLurker]

Like that’s gonna happen!

[SeeSharp]

We need some serious wage inflation.

The problem with that, and with this article in general, is that it overlooks the fact that wages are always the last prices to rise in an inflationary cycle. It is the first recipients of the new money, i.e. the big banks and government vendors, who get the money at its original purchasing power. As the new money trickles out into the economy it loses value (prices go up) so the later recipients get screwed. Wages are sticky. They take longer to rise. So inflation becomes a wealth transfer from wage earners to the government's friends. The only people who get screwed worse than wage earners are people who keep their savings in dollars.

If you are sure of your own future earnings prospects the best thing you can do at the beginning of an inflationary cycle is go into debt. Don't waste money on things that don't earn or at least save you money. But money you borrow now will be easier to pay back later when the money is worth less.

[GOP Poet]

bookmark

[OldGoatCPO]

I made big money in 74, $5.00 per hour bailing hay, but I was the foreman and responsible for finding other teenagers to work. The others got good money though, $3.00 per hour.

[BiglyCommentary]

I wonder how much of wage inflation will be due to mandated $15/hr minimum wage hikes.

[The Truth Will Make You Free]

$50T / 200M workers = $250,000 / worker.

[Iceclimber58]

I bought an old 2 1/2 ton flat bed truck in the spring of my junior year in high school. I put a loader on it, and hired 2 friends. We haul hay that summer what seemed like night and day. Bought a new camaro to start my senior year.

[crusher2013]

Your post contained a lot of knowledge in a few paragraphs.

I wish many more people understood what you are saying.

We may never have the political power to eliminate central banks and the games they play with fiat money. So the next best thing is for people to understand what is happening and to act in ways that reduce the transfer of wealth to the point where their is very little profit in it for the CB.

Perhaps at that point political change will be possible.

I believe that the explosion in crypto currencies is due to the desire of many people to exit the corrupt system we are trapped in.

[crusher2013]

Very little.

The effective minimum wage in many states is already higher than $15/hr.

Very few businesses will be able to find decent workers, who will stay for even a short time at a wage less than $15/hr.

[Mariner]

The $15 minimum wage is so yesterday.

By next summer it will be a de facto $25.

And a loaf of regular white bread will be $7.50.

[Oatka]

Nixon’s decision to remove the link between the USD and gold.

Just before his announcement, the family and I were going on a three-weeks vacation and I brought along a book titled "How you can profit from the coming devaluation" by Harry Browne.

The first night we stayed at a Federal Park campsite and after supper, I thought I'd "pass the time" and started reading. By 2 a.m via a Coleman lantern I was STILL reading, muttering "Holy Crap, Holy Crap" as the scales fell from my eyes.

So help me Hannah, in a few days Nixon announced the devaluation, and for a short time afterward, I was TOTALLY PIST as I thought I had missed the bandwagon.

Turned out I didn't as the govt went into charade mode and declared a two-tier gold market, topping off at $44 an ounce. That gave me a chance to start accumulating. (Thank you Baby Jesus)

I sold out at $400 as there was NO WAY gold was going to go higher. Got back in at $450 at the mania took hold and bailed at $650 as there was NO WAY . . . I think it topped out at $850+.

IMO we're in a similar situation as it pertains to the price of gold in the coming MONTHS. The slumbering giant is stirring - again:

[NetAddicted]

Rd later.