Isabella Weber
I think there is. It shows in the increasing number of people experiencing food insecurity. We see people queuing up at food banks and the food banks being completely overwhelmed. The president of the Greater Boston Food Bank told me, “We have been set up to support people who temporarily came into trouble for whatever reason, but we cannot deal with the amount of demand we are seeing in this crisis, because we are not set up to be an inflation buffer for large numbers of low-wage earners.”
If we look at just these facts, we can see that wage convergence is not the full story. Wage convergence has been observed as lower real wages rose more than higher wages. That is good news, of course. But if we see at the same time that food insecurity is going up and homelessness is reaching record highs, real economic hardship is clearly on the rise, and something is missing. Real wages depend on how much money people make and by what inflation rate we discount that money wage.
If we focus on inflation as an index for the whole economy, we tend to forget that it does not impact everyone to the same extent and that not everyone experiences the same inflation rate. Many people spend all their income and more — they don’t save or rely on debt. For this lower-income group, the inflation index impacts all of their income. Other people can save a significant share of their income, and on this saved income, they get higher interest rates, or maybe they are even part of the asset-holding class and they benefit from the profit explosions. For this richer group, some of the inflation burden is offset by the appreciation of their assets. However, this isn’t the case for large parts of the working class.
Even if we leave this aside, people experience different rates of inflation. The composition of the consumption basket that we use when we…
Auteur: Isabella Weber
