THAT ’70S SHOW: Burrito Economics: Why Chipotle’s Wage Hikes Are Not Good News.

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via spectator:

Even if the labor shortage is artificial, won’t the working class still benefit? The current workers certainly profit somewhat, but not for long if their rising wages are washed away by inflation. Price hikes are not restricted to burritos—prices across the economy are rising at the highest rates in over a decade.

The Federal Reserve contends that current inflation is “transitory.” If that bears out, then the economy will soon cool down. Supply chains will normalize, pandemic savings will be spent, and public benefits will expire in time for a wave of low-skilled workers to flood back into the slowing economy and stop wage growth in its tracks.

Alternatively, If the Fed is wrong and Deutsche Bank’s dire prediction of 1970s-style inflation holds true, then inflation will completely wipe out the gains of low-skilled workers into the foreseeable future. And once the sense of security brought by decades of low inflation disappears, the momentum of the new inflation expectations may carry it much further into the future than the pandemic recovery.

The picture gets even worse for low-wage workers who were enticed out of the labor market by generous benefits. They will have lost a year or more of work in which they may have been able to rise out of an entry-level job. Labor force experience is a significant factor in pay rates, and resume gaps make it tougher to find future work.

“We’re from the government and we’re here to help,” the wise man once warned us.

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h/t SG


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