Inflation benefit: rising wages

In the course of the economic upswing in the wake of the Covid pandemic, concerns about inflation are also picking up speed.

The prices of some goods such as cars are already noticeably higher, fueling fears that a sudden surge in inflation will reduce purchasing power over time.

While consumers may pay more for everyday items, it’s not all bad news for household incomes and expenses. Companies facing labor shortages also pay more to get workers to step through the door.

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“One of the biggest challenges employers face, in addition to finding new people, is keeping their current employees, and one way to do that is by providing current employees with new opportunities and higher pay,” said Mark Hamrick, senior Economic Analyst at Bankrate.com.

“In the power struggle between workers and employers, the balance has shifted in favor of the workers,” he said. “We haven’t always seen that in the past.”

Workers have already seen their paychecks increase for June. According to the Ministry of Labor, the average hourly wage increased 0.3% month-on-month and 3.6% year-on-year.

Gradual wage increases are unlikely to keep pace with the rising cost of living, however, warned David Weliver, founder of personal finance website Money Under 30.

“There will be a delay,” Weliver said. “Prices at the pump or in the grocery store can change very quickly, but you may not get that increase for a year.”

Companies are often slow to raise wages, especially when it becomes more expensive for them to buy raw materials, Weliver said. “They are going to feel a profit squeeze and the last thing they want to do is pay their workers more,” he added.

“This is the difficult situation we’re getting into.”

However, an acute labor shortage in certain industries such as leisure and hospitality adds an unprecedented twist, Weliver added.

In fact, on the job search website, 4.1% of companies were offering cash bonuses or other hiring incentives in June, more than double what it was a year ago. Some grocery prep jobs even advertise awards ranging from $ 100 to $ 2,500.

Still, some Economists fear that rising wages too quickly could cause companies to raise prices and create the phenomenon of inflation, which could do more harm than good.

President Joe Biden has rejected this view. “Many companies have done extremely well during this crisis and have done well for them,” he said in a speech in May.

“The simple fact, however, is that corporate profits are their highest in decades,” added the president. “Workers’ wages are lower than they have been in 70 years.

“We have more than enough headroom to raise workers’ wages without raising customer prices.”

The Federal Reserve has also downplayed recent inflation concerns, stating that they expect current price pressures to ease over time as the economy returns to normal.

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