Tuesday, February 24, 2015

Economy: Did Wal-Mart Start A New Wave Of Inflation?

(Drivebycuriosity) - It seems there is a cult of negativity in the media. Magazines and Internet news sites have been complaining about stagnating wages and warned about the risk that the US economy could fall into a deflation.

Recently Wal-Mart lifted her minimum wages. This could be seen as a sign that salaries start to rise again and that the deflation scares are overblown. But no, the news site "Business Insider" cries alarm again. No they rant: "We could be on a cusp major inflation event" (businessinsider). Apparently the media -  or at least "Business Insider" - are falling from one extreme into another.

Business Insider writes "that more wages for worker would create more pricing pressure in the economy". Yes, that could be, but not in the economical situation we have now. BI`s argumentation is way to simple.

First: Wal-Mart cannot rise prices just because of the wage hike. The retailer is competing against Target and other retailers and especially against online sellers like Amazon who employ less workers. A price hike would drive customers to cheaper competitors.

Second: The productivity of workers, even @ Wal-Mart, is climbing thanks to the ongoing automatization. Workers produce more goods & services thanks to robots and other machines which are getting more and better over the time. If the productivity rises, say 2%, than wages can also climb 2% without any pressures on prices.

Now Wal-Marts - and soon other companies - are responding to the climbing productivity and are sharing parts of the benefits of automatization with their employees - without causing inflation. Something to celebrate. The "Business Insider" article is just another example for the usual scare mongering of the media.

PS I took the pic from the "Business Insider`s" homepage, where it appeared as top news @ around 5pm on February 24, 2015.

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