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What glorious fun

What is apparent is that the Covid crisis created a disconnect between public and private sector pay that it is clear that this government is determined to maintain. This is despite the fact that the cost of re-establishing the link is small, and pays for itself anyway. What is more, because most of the public sector is not paid for by charging for services supplied, there is no mechanism for these pay rises to feed into price inflation.

If the government prints the money to pay for the pay rises then this increases inflation, no? Even MMT says that, right?

5 thoughts on “What glorious fun”

  1. If the public sector folks get a big rise, then that increases their buying power. Assuming that the quantity of goods & services remains the same then how is that not an inflationary pressure?

  2. Yes, the covid crisis *did* create a disconnect between public and private sector pay. The enforced idle in theprivate sector got 80% of pay (subject to a moderate limit) the enforced idle in the public sector got 100%.
    That is a bloody big disconnect

  3. Paying people more doesn’t factor into calculations of inflation, because wages aren’t included in the basket of goods and services used.

    People spending the extra money they have is an inflationary pressure, but that’s a different thing altogether.

    We have a classic secundum quid fallacy from Murphy here. If increased pay only leads to inflation if people spend the money, we can phrase that as ‘Increased pay does not lead to inflation if people save it all’.

    That sentence starts with ‘increased pay does not lead to inflation’, so that phrase is technically correct. As technically correct is the best kind of correct, everything is fine.

  4. given that in general the “public sector” doesn’t actually produce any services, then in one small sense he is almost right!

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