Workers saw their inflation-adjusted weekly wages fall 1.6 percent last year - the sharpest drop since 1990 - even as consumer prices rose only modestly.The article also states that during the 2000s, inflation-adjusted wages only increased by about 13%, which makes it the slowest growth in the past 50 years. This is a problem. Tons of people are losing jobs, and the people that still have their jobs can't do as much with their salaries. I'm also reminded of a psychological phenomenon in which people believe they have more buying power if they receive a pay increase, even if they really don't have that buying power. For example, if someone receives a .5% raise, but everything that they want to buy costs 5% more, that person will nevertheless be likely to spend more, when they should be spending less. Perhaps, small raises, even if they don't really have much of a benefit, could boost consumer confidence, and thus, the economy as a whole. On the other hand, it might just lead to people spending more money than they have again, so maybe it's not a good idea. I guess we're screwed either way.
Sunday, January 17, 2010
Our money just isn't worth what we thought it was
According to Forbes.com:
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While it is good to boost consumer confidence so that peole will spend more money, spending more money than they have will drive people further into dept. If people are unable to manage their money and go into dept, then the result will be a credit crunch.
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I feel like even if the government did increase wages gradually it would do more harm then good. There are a lot of people who just aren't money smart. They don't know when to limit their spending or how to manage their money. With the phenomenon you mentioned, I think that people would just get themselves further into dept.
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