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| [Penrose triangle*] |
My recent visit to Los Angeles reinforced my impression that much of the
economy is a strange and temporary constellation: high inflation, low wages and
a surplus of open positions. While there are reasons for each of the elements,
it is clear that sometime and somehow the situation will change as these
elements are in almost in opposition to each other in terms of market theory. Furthermore, there are
actions that the average citizen can take to lead to a positive change.
For the most part, each of the elements – high prices, low wages and
unwillingness to work has its own independent causes. The current inflation
has arisen from the massive public spending of the Covid years, supply
chain problems and significant rise in prices in oil and
wheat, two essential basic products in the modern economy. Those same Covid
years have made employers very hesitant to offer high wages as business
fortunes have experienced greats ebbs and flows over the last three years,
significantly reducing confidence in the future. The people that traditionally
take on low-pay service jobs have learned to get by at home, either by taking
government aid, receiving parental help and/or making money as independents. Given
the basic cost of living, taking on a minimum-wage job is actually losing money
as it is impossible to make it to the end of the month, even with minimal
expenses, in many places. Thus, there is no motivation to take on a
regular job and go down in standard of living. Thus, the Covid crisis has
created an antagonistic set of circumstances in terms of the labor market.
For the most part, these circumstances are temporary. The Ukrainian war
will end, re-establishing stability in the grain and oil markets. Furthermore,
given current public debt levels, public spending, including social payments, has to decrease. In addition,
businesses cannot function indefinitely with an insufficient number of
employees. The need to retain and hire personnel will lead to an increase in
wages at some time. As government aid decreases and personal frustration increases,
unemployed people will, somewhat grudgingly, the wages offered on the hope of
gaining wages or finding better jobs in the future. Economic equilibrium will
be established at a certain point.
Of course, the nature of that economic equilibrium is in question.
Depending on the scenario, the world economy could enter an inflationary cycle,
a recession or depression with or without inflationary, a growth cycle or
stagnant period. Clearly, the ideal would be a better version of the pre-corona
market but that is far from certain.
The person on the street, to be gender-neutral, has only a small impact
on this process. Nevertheless, some actions are possible. Supporting business
that provide good service gives them an advantage over their minimalistic
competitors and encourages companies to hire. Supporting unions in any way
helps protect individual workers from mistreatment, financial and other, and
helps guarantee a liveable wage. Encouraging family members to go to work and
being willing to support them financially during this difficult time benefits
them in the long term. Buying local, when relevant, strengthens local
businesses and encourages them to hire additional employees. All these
practical steps are beneficial for all parties until this storm of
circumstances passes by.
The recent stock market fluctuations, mainly negative, indicate a lack
of certainty about the economic future. Indeed, the current trends are
disturbing. In Hebrew, there is an expressions that there is nothing as permanent as the tempory. However, it seems quite possible that their root causes may
disappear relatively quickly to everybody’s benefit.
* Picture captions allow the blind to fully access the Internet.
Picture credit: Image by <a href="https://pixabay.com/users/ptra-359668/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1932539">ptra</a> from <a href="https://pixabay.com/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1932539">Pixabay</a>
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