Inflation and Labor

 Having lived through the Seventies, when interest rates got up to the 20% range, the current inflation does not seem more than a PITA. 

Except it keeps dogging Biden's poll numbers.

Which does not explain how the President of the United States of the United States caused inflation in Canada, and elsewhere (and most often higher than our own)?

But the real question I have is do the models of economists match our reality? It used to be wages (see below) caused inflation. What if this is no longer true? If old tools no longer work, then how is the government to take action?

Canada's The Walrus published Are We Seeing a Surge in Labour Unrest?, which has some points that Americans should be thinking about:

Could you explain the relationship between inflation and labour strikes?

In the late ’60s and ’70s, economists and policy makers were really concerned about a wage price spiral, where increasing productivity and increasing wage growth could drive unsustainably high levels of inflation across the economy—which would be further reinforced by a strong labour movement that could demand pay increases to keep up with that inflation. That’s not what’s happening now. Jim Stanford, an economist who’s done a lot of work with unions in the past, has done some good analysis to show that, in our current moment, we have high levels of inflation that are driven by corporate profits and by supply chain as well as general economic disruptions. Unlike in previous decades, wages are actually really struggling to keep up with inflation rather than the other way round. So what we see is that workers have been seeing pay increases of 2 percent, 5 percent at the most. And private sector wage increases have actually outstripped public sector pay, because public sector pay is held down by collective agreements.

In that sense, I think that the labour unrest and activism [are] related to this sense of workers falling farther and farther behind. And the very real struggle that particularly workers in the lower income brackets have just to keep up, never mind to get ahead. But at the same time, monetary policy, which raises interest rates to try and keep inflation in check, is also really hurting workers. We have really high levels of personal [or consumer] debt in Canada, and so if you have car loans and credit card debt, and of course mortgages, you’re paying more for your debt as well as paying more to buy groceries. So I think there’s a real cost-of-living crisis for workers.

The Bank of Canada has said that increased wages may actually contribute further to inflation.

We have to be really critical of monetary policy orthodoxy which says that we need to keep inflation down at all costs and workers’ wages are the problem but we’re not going to address corporate profits or other sources of inflation, including real estate. The Bank of Canada and the federal government [don’t] want to talk about that because nobody wants to piss off homeowners. So I think we need to be very critical in the sense of understanding where that policy orthodoxy comes from and who pays the cost for policies that are very strictly focused on holding inflation down through raising interest rates and wage suppression, essentially.

sch 5/29