Wages and Inflation Debate

There's a lot of ways to raise wages without prices. You can reduce profits. You can reduce staff (paying each staff member more). Why should this be the consumer's problem?

I think it’s kind of a misunderstanding that this is how it works. Increasing wages can save companies money by improved productivity and reduced turnover. Moreover the price of the product is dictated by market demands and owners may simply have to take less profit in order to sell at market price. That is of course if increased productivity doesn’t completely cancel out the wage increase. Finally higher wages means people can afford higher prices to some extent.

Sounds like you need to raise your prices so you can pay competitive wages. So... inflation?

Theoretically, these businesses are already priced to maximize profit. So it could be that increased wages increases the cost to the consumer. It could also mean lower profits for the business if they've already priced at the max their customers are willing to pay.

Businesses aren’t worried about paying better wages, they are worried about being unable to produce their goods or services. Sure they can give better wages but now what they are producing has to cost more. Have that happen across all industries and it is inflation. With inflation no one ends up better than where they started, particularly the lowest wage employees will be the hardest hit by inflation.

Wage is just one cost of doing business. Increasing wages to a certain percentage raises prices by a lower percentage. If you lower profits it can even be price-neutral.

i think the idea is if people can't get higher wages they won't be able to pay the high pricesthus the prices go down and inflation goes down

Or will the prices just increase to account for the higher wage? Isn't that easier?

In my (laymans) understanding of economics, increasing all these wages will increase prices of things those people consume too, which will basically result in a marginally change.

I’m not an economist, but won’t prices have to rise to offset the increased labor costs?