Should All Employees Around The World Get A Raise To Sustain Since There Is A Huge Inflation? What Do You Suggest ?
Dear Kwadwo Boakye,
Initially, inflation is generated by an economic crisis-induced shortage of many types of basic products and/or the introduction of additional large amounts of money into the economy without being covered by the new products and services produced. Then, once inflation reaches double-digit dimensions, a price and wage spiral begins to emerge. Employees demand wage increases from their employers seeing the loss of purchasing power of the money they receive in wages. On the other hand, the prices of raw materials, prefabricated products and other types of production factors are rising. Entrepreneurs pass on rising costs to consumers by raising the prices of products and services offered to the market. Prices for many types of consumer products and services continue to rise. This then generates a greater extent of the loss of purchasing power of money received in wages. Employees are once again turning to employers expecting a pay rise. The labour market situation is an important issue. Whether employees demand increases from employers depends on the labour market situation, whether there is an employer or employee market, whether unemployment is low or high. When unemployment is low and there is a market for workers in many professions, then workers demand pay rises from employers and employers give those rises. On the other hand, when there is high unemployment and an employer's market prevails, then the scale of pay rises is relatively small and the downturn in the economy causes a drop in production, a drop in real income, a drop in consumption, and job cuts in many businesses and companies. In a situation of rising unemployment and high inflation, stagflation can occur, exacerbating the developing economic crisis. However, despite this situation of economic downturn, in the public sectors of the economy, there may be questions from employees working in public sector institutions about salary increases to reduce the scale of the loss of purchasing power of money received in wages. By contrast, in the commercial sectors of the economy, wage levels are shaped by the changing situation of product and service markets, labour markets, factor markets, etc. The wage-price spiral may cause a continuation of the increase in the prices of products and services, a continuation of the increase in inflation. If this process continues over a period of several consecutive quarters, it can lead to inflation growth slipping out of the control of institutions whose purpose is to ensure price stability of products and services, i.e. out of the control of the central bank. Unless the central bank efficiently performs its function of taking care of the value of money and does not allow this to happen.
Regards,
Dariusz Prokopowicz
I think that will be bad economic policy to increase wages/salary when there is inflation. If this happens, we should also be able to reverse the increase in salary once inflation falls significantly.
The problem is that you cannot decrease wages/salary when inflation falls significantly because wages/salaries are sticky downwards (they cannot be reduced once they are increased because labour union will resist a decrease in salary).
To increase salary, we need a law that require the minimum wage to be reviewed and increased every 2 years. So that no matter how high inflation is, a salary review will soon take place.
This is a more meaningful approach in my opinion
All things being equal, all employees deserve paycheck increment during inflation period due to the fact that inflation reduces purchasing power of employees. If the employer has welfare of his employees at heart, increment in paycheck is inevitable
Yes it is to keep up with the inflation and maintain employee morale and production as well as integrity.
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