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Comment by giantg2 | Hacker News Reader

Those are real wages. We would expect to see that during a sudden jump in inflation. Wages tend to lag inflation.

The other interesting part in that article is that excluding fuel and food still shows 2.8% inflation - only 1% attributable to food and fuel. Makes it seem like the main article and this article have different spins.

Edit: Wow people are jumping on this. The point is that food and fuel increases account for about 26% of the overall inflation number, meaning that the bulk of inflation is not related directly to fuel. The original article makes it it seem different.

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I will say, this past inflation spike has completely broken the assumptions I had from 1970s economics that employers would raise their 'cost of living' raises to keep pace with inflation. My employer seems to think 2.5% is fine, as they've done it multiple years in recent past with only one extraordinary year netting 4%. I am now very skeptical of any so called 'wage price spiral'

Nobody gives you cost of living increases. That's not how a market works. You get cost of LABOR increases. These are related but only indirectly.

Employers pay you the least amount of money it takes to keep you from working somewhere else. It's always been true and it probably always will be.

Employers will increase your wages just enough to keep you from leaving.

With structural disincentives to leaving (medical coverage in the US), that is almost always a less-than-inflation amount.

Do employers even call it a COL increase any more? My employer "rebranded" the annual raises as "merit increases" many years ago.

All of my employers, current and past, have or had only merit increases. COL increases are unheard of.

How big are your merit raises, typically?

Typically around 7%.

That's why macro economic data is based on nationally reported data from tens of thousands employers rather than just one company.

We can look at the data and clearly see the inflection point where wages started rising faster once the pandemic began.

https://fred.stlouisfed.org/series/ECIWAG

And looking at real wages, we can see that wages have actually outpaced inflation since ~2015

https://fred.stlouisfed.org/series/LES1252881600Q

    wages have actually outpaced inflation since ~2015

Yeah.. just ignore the 30 years where it was basically stagnant.

The driver of real wages is the economic level of the whole country, which moves at a pretty slow pace (if at all) for an advanced economy. Many jobs today pay around the same as they did 30 years ago, because dollars (currency) aren't a measure of true value, and lots if not most jobs produce the same relative value today as they did 30 years ago.

To put that more plainly, lower class, middle class, and upper class defining jobs pretty much stay the same.

> I am now very skeptical of any so called 'wage price spiral'

The wage-price spiral now happens when people move. I've definitely noticed that average salaries for my role (data person) have increased singificantly since 2020 or so.

Ah fuel and food - those classic unimportant things.

Fuel and food are excluded from core inflation not because they're unimportant (they are in fact incredibly important) but because they are much more volatile in price--going up and down in bigger increments--so that you get a more stable view of inflation by excluding them.

But it's a bit of a nasty trick because food, in particular, has inflated in price a lot the past 3 years. Some items, like sugar, are legitimately double the price they were.

> only 1% attributable to food and fuel

What do you mean by this? If adding food and fuel raises CPI by 1%, then the food and fuel prices have necessarily raised by _more_ than the combined 3.8%.

"What do you mean by this?"

Pretty simple - an overall increase of 1% inflation is attributed to food and fuel.

Umm okay so many other aspects of the cpi respond slower and this is a recent shock…

Food and fuel are more sensitive and respond first. There’s been no time for the effects to really get into the others.

And Food and fuel having huge jumps in inflation is major visible pain for consumers.

Yes, and that volatility is why economists exclude fuel and food from core CPI.

Except oil prices are predicted to remain over $100 for at least the rest of this year. It’s not a short term thing.

Depends on your definition of short term. Did oil prices drop after '08-'09 timeframe? A few years could be seen as short term in economic trends.

For most Americans (aka: not the top 5% like SWEs), food and fuel increases hurt a lot.

SWEs do feel the pain, too. Not everyone has a 200K+ gig. Especially for a big family.

Most SWEs are not top 5%. The median is about $135/yr, and a significant portion of us make under that.

The point was that a 1% increase in inflation due to food and fuel wasnt the end of the world. Does a 1% cost of living increase hurt? Sure, for many people on the margin of making ends meet it can be bad. For most people, $1 more out of $100 is survivable.

Usually from what I have seen, most SWE's partners are also in tech or "white collar adjacent" making similar money. Which makes a household income of $270k, putting them in somewhere around the top ~7.5%.

I have seen some of that, but there is still plenty of non-tech partners, especially if the tech half is at a non-tech company. In my experience, the managers are the ones most likely to have a high earning spouse. It seems like most of the managers I know have a spouse making $100k+. I don't make as much as others, but I can't even imagine how good my life could be if my wife made the same amount as me so we had a combined income close to $200k.

It's also kind of wild to think that 1 out of 6 households in the US is making $200k+. I get that many of them are in higher cost of living areas where wages are higher, but still WTF. On the other hand, it's something like 1 out of 4 households are making under $50k. Makes me wonder how many of those are retirees vs working age, and what the median household income would be for 25-55yo vs the entire population.

> Makes me wonder how many of those are retirees vs working age, and what the median household income would be for 25-55yo vs the entire population.

https://dqydj.com/average-median-top-income-by-age-percentil...

> but I can't even imagine how good my life could be if my wife made the same amount as me so we had a combined income close to $200k.

Outside of a VHCOL, $200k mostly buys you peace of mind, if you live modestly. You get to build savings to be able to say F you to your employer and maybe take time off and spend a few thousand without worry if a family member needs medical attention.

Inside of a VHCOL, $200k merely helps you get a downpayment for a half decent home.

You do realize food and fuel didn’t just rise 1% on an annual basis? Right?

I think you're misinterpreting that. Everything other than food and fuel went up 2.8%. Everything (including food and fuel) went up 3.8%. Therefore food and fuel went up more than 3.8%.

This. Energy is up 17.9% and energy commodities (oil, gas, etc.) 29.2%. See the CPI release: https://www.bls.gov/news.release/cpi.nr0.htm.

     Therefore food and fuel went up more than 3.8%.

We can see that advertised on every corner, too. Gas costs for me locally went from $3 pre-war to over $5 now. My "investment" in EVs and solar is feeling really good right now.

I think you're misinterpreting me. The overall inflation increase attributed to food and fuel increases is 1%.

I still don't think that's right.

You have food and fuel, which is some fraction of the economy - call that F. You have a rate of inflation in fuel and food - call that f. And you have a rate of inflation in everything else - call that e. Then you have

  3.8 = e(1-F) + fF.

You also have e = 2.8.

I think what you're claiming is that fF = 1.0, so that e(1-F) = 2.8. And I think that's wrong. When they say inflation apart from food and fuel is 2.8, they mean e, not e(1-F).

You're over complicating it because you don't need rates within subcategories when looking at the whole - e is given and f is useless.

3.8 - 2.8 = 1

The overall inflation is 3.8. Overall inflation without food and fuel is 2.8. The overall inflation attributable to food and fuel must then be 1 (this is different than rste of inflation within food and fuel as a category, f).

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