@melovida
Incorrect. Lower classes do not hoard money therefore inflation does not harm them directly. If you believe minimum wage is helpful (different conversation) thrm you coukd argue not adjusting minimum wage hurts them, but thats not inflations fault.

The only person inflation hurts is someone who holds onto large amounts of cash for long periods of time.

@freemo @melovida The reason inflation is considered advantageous is because it allows the people with the capital to automatically lower salaries without having to say that they lower salaries. Instead they can say that they just didn't give you as big a raise as the inflation rate.

In the same way, inflation allows government "room for reform" by automatically lowering the real value of any budget posts, so that every budget can be like Santa and increase spending on pet issues rather having to justify lowering spending on existing commitments.

Finally, inflation favors businesses that have debt-leveraged investment as their business model, e.g. banks.

Or, to put it more succinctly: "disproportionate effects on purchasing power of the lower classes"

@clacke

The reason inflation is considered advantageous is because it allows the people with the capital to automatically lower salaries without having to say that they lower salaries. Instead they can say that they just didn’t give you as big a raise as the inflation rate.

While this sounds good, in reality it isnt true at all. Outside of price-fixing (basically minimum wage) the average salary follows inflation almost perfectly. The reason for this is companies dont get to decide a persons salary, market pressures do, so when inflation goes up hourly wagies go up to match 1:1. Attached you will see a chart showing hourly wages and inflation overlaid and you can see they are a near perfect match.

In the same way, inflation allows government “room for reform” by automatically lowering the real value of any budget posts, so that every budget can be like Santa and increase spending on pet issues rather having to justify lowering spending on existing commitments.

Also not true. While inflation allows them to increase the number of dollars they spend, since it also means everyones salary goes up, and thus taxes go up it matches 1:1 as well. You have to stop thinking money is wealth, it isn’t. Wealth remains relatively constant when healthy levels of inflation happen, all that changes is the dollar figure.

Finally, inflation favors businesses that have debt-leveraged investment as their business model, e.g. banks.

Not exactly, while it helps both people and businesses in debt by devaluing their debt it does so by the same proportion that businesses which invest their capitol in things rather than sit on a wad of cash. So what you wind up seeing is that literally everyone who isnt hoarding benefits, those in debt, those who invest, little old ladies with a 401K etc.

Or, to put it more succinctly: “disproportionate effects on purchasing power of the lower classes”

False by above mentioned points and data provided.. if the constituent points are debunked this conclusion also is debunked by extension.

@melovida

@freemo Is average salary the right metric? How is the median salary of low skill jobs affected? I'm coming from the suspicion that certain sectors benefit more from inflation, and the upper outliers ruin the average.

@melovida Well the issue with that is that the poorest people get paid through a price-fixing scheme (minimum wage) and thus there is a compounding factor there that will make the graphs harder to interprit.

Consider if a persons natural-wage (the wage they would get without minimum wage) is at 2$ an hour and inflation would raise it to 4$ an hour, if minimum wage was in place during that time at 5$ an hour then you would see their actual pay stay the same, which effectively is the same as lower pay in inflation adjusted dollars. So in order for it to work for the minimum wage population then the minimum wage would need to follow inflation, since it is manually determined this is rarely the case.

That said historically at least we have raised minimum wage enough to ensure that those on minimum wage either gained wealth and wages (along with the rest of society) in adjusted dollars, or at a minimum broke even (were no worse off than before). Attached you will find a chart showing the minimum wage as a inflation adjusted value. You will see from about 1940 to 1985 the inflation adjusted minimum wage actually mostly trended up (showing those at minimum wage were benefiting from inflation). However from 1985 to 2016 they then leveled of and bounced up and down by about a dollar, on average being no worse or better off.

So would seem from the data that at least with our current handling of the low-income sector they arent hurt by inflation either. However we could have managed the minimum wage a bit better so they benefited as much as the rest of society the past few decades, but at least they didnt loose out in that time.

@lucifargundam Never a bad move regardless of inflation :)

@Q_uantumB

That makes no sense.. for starters if you saved 5K, 10K or any amount it wont be significantly effected by inflation unless you hold onto it for decades, which is a pretty irresponsible way to save for retirement or long-term.

Second, the idea that 5k or 10k is too little to invest in value generating assets make no sense either. Even an extremely safe mutual fund is value generating and typically many orders of magnitude beyond loss due to inflation. Moreover for most mutual funds you can invest in it in rather small increments (100$ or even less). So no reason not to do this.

In fact the vast majority of middle class do exactly this. Little old ladies in nursing homes arent living off saving from 50 years ago, they are living off their 401K or roth IRA. You will never hear your banker who advices you on long-term savings for retirement or other purposes to keep large amounts of money as cash for long periods of time.

Literally inflation is helping exactly the type of person you describe, people with 5K or 10K saving for retirement in a retirement fun (which is usually roth IRA or 401K).