The relationship between the rising costs and workers wage expectations also contribute to inflation. I remember buying beer a few years ago for $6.99 a six pack. For instance, a while back the global prices of hops went up and the cost of a six pack went up a couple dollars. Rising costs for things like labor and materials can result in the increase of prices. You can see this in a hot housing market where the number of people wanting to buy a home is larger than the number of homes on the market. Rising demand for goods can cause the supply to go down, thus increasing prices. There are different ways inflation can happen in an economy. In that case people become poorer, even if they think they are making more money. But where it gets troublesome is when the income levels of a population don’t track with or exceed inflation. It means that you can buy less with your money than in the past.Īll economies experience inflation (and deflation) at some point. The simple definition of inflation is when prices rise and the purchasing power of a currency drops. The only people to do well? Very high earners-or the ultra rich-with a 41% increase.īefore we get into the effects of inflation on wage growth, I want to take a moment to define inflation. Since 1979, the middle class wages are up only 6% and low-class wages are down 5%.
Some people have seen very small gains, but not much. I shared how the wages of the middle class have been largely stagnant. Before that I wrote about the reason you feel (and are) poorer.
I shared how the rising cost of healthcare was causing traditionally financially comfortable folks to spend less and less on basic needs. A while back, I wrote about why the middle class is screwed.
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