Topic: Deflation: Wage rates and the employee VS the Employer (Read 5725 times)
I DON'T KNOW WHAT WE'RE YELLING ABOOOUT!
lol thanks for reminding me. i totally forgot. phew. question answered.
I'm glad we got this straightened out. 
Is this some new form of trolling?
Step 1) You keep asking the same question.
Step 2) We keep giving you the same answer.
Step 3) You always acknowledge our answer.
Step 4) You apparently forget that wages can go down, and return to step 1.
Step 1) You keep asking the same question.
Step 2) We keep giving you the same answer.
Step 3) You always acknowledge our answer.
Step 4) You apparently forget that wages can go down, and return to step 1.
lol thanks for reminding me. i totally forgot. phew. question answered.
lol ... they would fire you. That's job instability.
Or pay you less (in nominal terms). How do you keep forgetting this option?
lol ... they would fire you. That's job instability.
I believe they can go either way.
Now, I'll ask you, why would an employer decide to pay you more if the purchasing power of your wage is worth more and more every year?
I believe that they wouldn't in a deflationary economy. They would either fire you and hire someone cheaper or want to pay you less.
You are exactly right. So what is your point? It doesn't add anything to job instability. Now, I'll ask you, why would an employer decide to pay you more if the purchasing power of your wage is worth more and more every year?
I believe that they wouldn't in a deflationary economy. They would either fire you and hire someone cheaper or want to pay you less.
I believe they can go either way.
Now, I'll ask you, why would an employer decide to pay you more if the purchasing power of your wage is worth more and more every year?
I believe that they wouldn't in a deflationary economy. They would either fire you and hire someone cheaper or want to pay you less.
Now, I'll ask you, why would an employer decide to pay you more if the purchasing power of your wage is worth more and more every year?
I believe that they wouldn't in a deflationary economy. They would either fire you and hire someone cheaper or want to pay you less.
I don't think contracts promote career longevity. If your employees contract is up every year if gives your employee the chance to look for other jobs.
And given my example I think my question was very specific. Deflation will cause you to get over paid for a job over time, making it enticing for an employer to fire you and hire someone else on for a lower price.
And given my example I think my question was very specific. Deflation will cause you to get over paid for a job over time, making it enticing for an employer to fire you and hire someone else on for a lower price.
I ask again. Why is it that you think that standard of living adjustments can only go in one direction?
You think that deflation will lead to overpayment, but don't believe that inflation leads to underpayment.
No, it would make it enticing for an employer to lower your wage.
If bitcoins increased in value by say 10% a year, then that would likely be directly added to the employee's contract.
We pay you X, decreasing at 10% per year. A raise would be where they don't drop it.
No, it would make it enticing for an employer to lower your wage.
If bitcoins increased in value by say 10% a year, then that would likely be directly added to the employee's contract.
We pay you X, decreasing at 10% per year. A raise would be where they don't drop it.
I don't think contracts promote career longevity. If your employees contract is up every year if gives your employee the chance to look for other jobs.
And given my example I think my question was very specific. Deflation will cause you to get over paid for a job over time, making it enticing for an employer to fire you and hire someone else on for a lower price.
No, it would make it enticing for an employer to lower your wage. And given my example I think my question was very specific. Deflation will cause you to get over paid for a job over time, making it enticing for an employer to fire you and hire someone else on for a lower price.
I don't think contracts promote career longevity. If your employees contract is up every year if gives your employee the chance to look for other jobs.
And given my example I think my question was very specific. Deflation will cause you to get over paid for a job over time, making it enticing for an employer to fire you and hire someone else on for a lower price.
And given my example I think my question was very specific. Deflation will cause you to get over paid for a job over time, making it enticing for an employer to fire you and hire someone else on for a lower price.
Quote
If you read my original question I give the example of, if someone pays you 10 bucks an hour and inflation hits at 10% a year. Why, in 10 years time, wouldn't your employer fire you and hire 10 other people at 1 dollar an hour?
Because he couldn't afford to. If he can't afford to hire 10 employees at market rates today, why would you think he would magically be able and willing to do so in 10 years?Quote
The only other option for the employer that I can think of is it would be common place to pass out a standard of living adjustment and pay you less every year. That or labor would start to get underpaid in order to counter act deflation and keep employees. Either way it doesn't promote employment longevity and job stability. It seems to be the same problem as inflation just in reverse.
It's precisely the same problem, which is why it's no problem at all. You can make the same argument about inflation -- employees constantly demanding raises will piss off employers and hurt employment longevity and job stability. But that's obviously not true. It really makes no difference.Because firing the employee hired ten years prior frees up 10 bucks an hour for the employer to now spend. Whether or not he chooses to spend that on hiring 10 new employees or hiring 1 new employee at 1$ an hour to replace the previous and pocketing the extra 9 bucks doesn't matter. Its that in 10 years the 1st employee is now too expensive and can be replaced by cheaper labor.
And regardless if it is the same problem or reverse problem or not I don't care. I'm not arguing that, I'm not arguing anything.
However, my question is does an Austrian school economy hurt job stability? Seems like most people in here say it will hurt it more so than in an inflationary economy. Or cause employers to pay out lower wages then what the employee time is worth in anticipation of deflation. The burden of employment longevity seems to be on the employee rather than the company in a deflationary economy. And the only way around this seems to be cost of living adjustment where a company would pay you less every year to make up for deflation.
Either way it doesn't promote employment longevity and job stability. It seems to be the same problem as inflation just in reverse.
I don't know if I did a good job explaining this clearly. Let me restate.
If decreasing prices (deflation) are caused by increasing productivity, then the average worker will deserve the increasing purchasing power his fixed salary provides, and he will never need an actual raise or a pay cut (as long as he remains exactly average).
If decreasing prices (deflation) are caused by increasing productivity, then the average worker will deserve the increasing purchasing power his fixed salary provides, and he will never need an actual raise or a pay cut (as long as he remains exactly average).
Right, but the real question here is what happens if deflation is caused by scarcity of currency occurring at a rate that's likely to exceed any increase in real value elsewhere. And the answer is, so long as this deflation isn't terribly unpredictable, nothing much will happen.I agree with you, JoelKatz. In a Bitcoin economy where continuously increasing demand drives up the value of bitcoins, general price decrease (deflation) won't have a negative effect on employment. At worst, employers and employees will occasionally renegotiate their contracts.
I think OP's real question was more general:
Would there be job stability in a Austrian/deflationary economy?
Yes. In general, job stability will not be negatively affected in an "Austrian/deflationary" economy.
If decreasing prices (deflation) are caused by increasing productivity, then the average worker will deserve the increasing purchasing power his fixed salary provides, and he will never need an actual raise or a pay cut (as long as he remains exactly average).
Right, but the real question here is what happens if deflation is caused by scarcity of currency occurring at a rate that's likely to exceed any increase in real value elsewhere. And the answer is, so long as this deflation isn't terribly unpredictable, nothing much will happen. Either way it doesn't promote employment longevity and job stability. It seems to be the same problem as inflation just in reverse.
I don't know if I did a good job explaining this clearly. Let me restate.
If decreasing prices (deflation) are caused by increasing productivity, then the average worker will deserve the increasing purchasing power his fixed salary provides, and he will never need an actual raise or a pay cut (as long as he remains exactly average).
I'm not arguing that it would be a tough sell, though I do think that's a PR problem when trying to sell this idea. I am asking if job stability would suffer in a deflationary economy. It sounds like most people are saying that job stability would suffer and that shouldn't matter. Or that people would get use to it job instability or live with pay decreases.
They wouldn't be living with pay decreases. If I pay one week with 50 one dollar bills and the next day with one 50 dollar bill, has your pay decreased because you received fewer dollars?There is no reason job stability would suffer. You can make the same argument in an inflationary economy and it's equally wrong. Here it goes: "Suppose I get a job for $55,000 per year. Two years later, due to inflation, I'm not being paid enough. So unless my boss is willing to raise my salary, I'll take a new job for a higher wage. So job stability will suffer due to inflation." But we all know that's not right. Both participants have an incentive to restore the wage to market value.
Your right, 2 years later $55,000 wouldn't be as much. So it has become very common place to have standard of living adjustments while working at companies currently.
And I don't think you are understanding what I am saying. In order to combat deflation companies would either need to adjust your pay, (pay you less every year) or fire you and hire someone new for less money. If you read my original question I give the example of, if someone pays you 10 bucks an hour and inflation hits at 10% a year. Why, in 10 years time, wouldn't your employer fire you and hire 10 other people at 1 dollar an hour? The only other option for the employer that I can think of is it would be common place to pass out a standard of living adjustment and pay you less every year. That or labor would start to get underpaid in order to counter act deflation and keep employees. Either way it doesn't promote employment longevity and job stability. It seems to be the same problem as inflation just in reverse.
And I don't think you are understanding what I am saying. In order to combat deflation companies would either need to adjust your pay, (pay you less every year) or fire you and hire someone new for less money.
Right. If you're rational, they'll do the former. If you're irrational, they'll do the latter. It is the same as inflation but in reverse. An irrational employer who refuses to raise wages to combat inflation will lose employees. A rational one will raise wages.Quote
If you read my original question I give the example of, if someone pays you 10 bucks an hour and inflation hits at 10% a year. Why, in 10 years time, wouldn't your employer fire you and hire 10 other people at 1 dollar an hour?
Because he couldn't afford to. If he can't afford to hire 10 employees at market rates today, why would you think he would magically be able and willing to do so in 10 years?Quote
The only other option for the employer that I can think of is it would be common place to pass out a standard of living adjustment and pay you less every year. That or labor would start to get underpaid in order to counter act deflation and keep employees. Either way it doesn't promote employment longevity and job stability. It seems to be the same problem as inflation just in reverse.
It's precisely the same problem, which is why it's no problem at all. You can make the same argument about inflation -- employees constantly demanding raises will piss off employers and hurt employment longevity and job stability. But that's obviously not true. It really makes no difference. Jump to: