The government says it’s unfair to taxpayers to pay now. But the simple fact is if prices rise by 10% and pay rises by 10% then on average profits will rise by 10% and so taxes will rise by 10%. That’s not rocket science, but it means inflation-matching pay rises fund themselves.
That’s another Nobel on the way to Ely then.
Then there’s this:
The government says paying people will create ‘inflationary expectations’ and more pay demands but the only thing that will do that is not paying now. People who settle for less than inflation will of course be back for more pay in the future. Paying in full now will prevent that.
OK, so more inflation is bad.
There are three consequences of that failure to pay in full. First, the wealthy save their extra money, and there is little or no economic stimulus to the economy as a result, which there would be if a pay rise was given instead.
But we should pay the pay rises to provide stimulus to the economy and therefore more inflation.
February 1 2023 at 11:17 am
Can someone please give a plausible explanation of how increasing the pay of teachers, nurses, doctors, firemen, and other public sector workers, leads to inflation? Which prices are going to rise as a result, which would not otherwise have risen anyway?
Richard Murphy says:
February 1 2023 at 12:27 pm
As we both know, none will
Your comment now adapted into a tweet….
Tax is a price, right?