Topic: Deflation: Wage rates and the employee VS the Employer - page 3. (Read 5740 times)

If he can't lower your wage, he won't hire you at $10/hour in the first place. He'll hire you at $9/hour or he'll insist on the right to lower your wages to keep up with their declining value. Just as people get cost of living increases, they'll get cost of living decreases. *Predictable* deflation is easily accounted for.

This is the error in the argument that bitcoin deflation will cause hoarding. Unless you want to hold the bitcoins for some reason, you don't need to hold them to get the value they will gain through deflation. The value of each bitcoin includes the value of the right to hold that bitcoin and watch it increase in value. So if you transfer the bitcoin today, you can collect on that expected deflation immediately. There is no need to wait -- the expected inflation or deflation is already built into the price of things.

I totally agree with your conclusion,

we need to break some myths of the old school of economics ,

I am currently working on a thesis on the impact of Bitcoin on world economy,

An informed populace... would have prevented the situation we are in right now. And I'm not talking about MtGox.

The deflation did not lower their wage. The deflation artificially gave them the more cost for less production value. If deflation was accelerated to 90%, then a person working at the original 10$ would be producing goods worth 2$.

If they understand market pressure then they would also understand that their 1$ paycheck buys as much as 10$ used to before the deflation. They would also understand that if you are selling their retail production at 10% of cost they will very quickly be without work as you will be out of business. It is nice to keep employees, but if they fail to see value in making economically sound decisions, then they will find that I wouldn't see value in continuing to fund their dream world.

I haven't studied the Austrian School, but I do know that Keynes has been completely discredited by by anyone who's actually bothered to notice what's been going on in our economy...

I know that Ron Paul is an advocate of the Austrian School, and he's the first politician I've believed has integrity since I was old enough to pay attention to the difference between what "public servants" (cough) say and what they actually do.

Not topical to the deflationary question regarding wages, but general to a prominent antidote to the dominant [collectivist/redistributionist/socialist/fascist] Keynesian followers.

By adjusting costs do you mean they would lower the hourly rate of the employee?


To me this seems to be a similar problem to inflation and cost of living increases except in reverse. I feel like a cost of living decrease would be a tough sell to employees. "Thanks for doing a great job... now let me reduce your pay so I can make the same amount."

Also, this doesn't seem to promote job security or stability. Would Job stability suffer in a Austrian school economy?

If in paying 10$ an hour the employee creates production value of 20$...with deflation of 10% the employer would now receive 18$ of productivity. They can adjust cost and keep the same percentage margin (50% cost per retail productivity unit) or keep labor happy and keep their pay higher and get lower margins. Market will adjust and producers will keep pace or go out of business.

-Richard

Well, wage stickiness might make things a bit better for the employee, but employers would come up with some shenanigans.

No, employers would just start handing out wage decreases instead of wage increases.

I would love to post this in the economic section, but... I am a newbie.

The Austrian school of economics says that deflation seems to have a positive effect on everyone and I would tend to agree. Inflationary economics seems to really be bad all around except for the government and central banks. In a In Keynesian/inflationary economics Goods and services tend to go up in price while the wages employees are earning go down in value every year, thus the need for employers to give out standard for living increases. In a Austrian/deflationary economy there would be no need for a standard of living increase as the amount of money they were making on a yearly or hourly basis would increase in its purchasing power each year.

Which brings me to my question:

Would there be job stability in a Austrian/deflationary economy?

I know there would be more jobs available, but It seems there would be no reason for a company to want to keep older employees as they are paying them much more in purchasing power than new employees.

For example: Lets say I, the employer, hired you, the employee, on at 10$ an hour. And for easy math sake lets say there is deflation at 10% a year. So the following year I hire employee number 2, who does the exact same job you do, at 9 dollars an hour. I pay him 9$ because I have adjusted his rate for his 10% deflation. Now lets say this continues for 10 years. As an employer, why would I want to keep you on at 10 dollars an hour when I could fire you, and use your 10 dollars an hour to hire 10 people to replace you at 1 dollar an hour. It seems like deflation would make a standard of living decrease common amongst business.

This is the only problem that I can see in the Austrian way of thinking. And in fairness it seems like a much better problem then having your wage purchasing power stripped away from you every year through inflation. It just doesn't seem to promote longevity in the career of an employee.  




Maybe a nice moderator can place this in the economics section for me