Forum: Author Hangout

That cycle was happening while we were on the gold standard as well.

We had actual depressions (not just recessions, which is what we've had since the 40s. These were deflationary years where GDP fell steeply) in 1807, 1815, 1873, 1920, 1929. (This was the last depression because after this we changed the way we managed economic slow downs which has effectively kept a recession from falling into a depression)

We also had recessions in 1785, 1789, 1792, 1796, 1802, 1812, 1822, 1825, 1828, 1833, 1836, 1839, 1845, 1847, 1853, 1857, 1860, 1865, 1869, 1882, 1887, 1890, 1893, 1896, 1899, 1902, 1907, 1910, 1913, 1918, 1923, 1926. (more after this, I'm just stopping at the great depression)

All of this was while we were on the gold standard. Cycles of recession and growth are just how economies work, regardless of the backing of currency.

I'm not at all sure that's true (in fact, I'm nearly certain it's not true). For one thing, you're not really comparing 'minimum wage', since an enormous number of people work at minimum wages below '$12-$15'. Far fewer worked below $1.00/hour in 1967.

More to the point: restaurants tend to keep labor costs below 35% of total costs, often well below (McDonalds is estimated to be at or below 20%, for instance). If you double the wages of restaurant employees, you would expect a 20-35% rise in cost, and thus roughly the same in price.

For sandwich prices to rise inelastically with wages, one would have to assume that the cost of materials, utilities, rents, etc also rose inelastically with wages, but that seems incredibly unlikely.

Much of the current rise in food prices has little to nothing to do with wages. It was widely reported in 2020, for instance, that herd culling was going to result in far higher beef prices for at least the next five years. Bird flu is decimating chicken production, driving chicken and egg prices higher at an enormous clip. And so on, and so forth. If you focus on restaurant price increases in recent years, they track really well with cost of materials and poorly with wage increases.

And, if you drop back to nearly anywhere in the 2010s, the price of your 'decent lunch' was near or below the federal minimum wage. The federal minimum wage hasn't budged much at all, but the price of the decent lunch has nearly doubled. Wages haven't doubled for fast food workers in general, and haven't even vaguely doubled for meat packers, farm workers, and so forth.

Raise the minimum wage to $20 - your lunch will cost $20.
Raise it to $100, and you'll soon be paying $100 for that same sandwich.

I don't think it's straightforward cause and effect but the prices of some food items have long been a reliable indicator of the cost of living eg salt, sugar (until recently), rice (in countries like China where it's a staple.)

AJ

Oh, I absolutely believe that. No argument at all.

My point was much more that prices of food items are not necessarily a reliable indicator of wage growth (or vice versa).

That beef is up increases the cost of living. So does (famously, in the US) the cost of eggs. And chicken.

But none of those owe much of their post-2020 rise to wage growth. There are obvious structural reasons for their rise - herd culling during COVID-19 in 2020 and the 'bird flu' in 2024-5 (with associated mass flock cullings).

My point was much more that prices of food items are not necessarily a reliable indicator of wage growth (or vice versa).

There is the issue of price point, particularly for prepared food. As wages rise so do processed food prices as manufacturers take advantage. If wages are steady or falling in a time of inflation, portion sizes shrink or cheaper ingredients are sourced. There's a tendency to keep price points in line with wages.

AJ

I'm not sure 5 years (beef, milk, etc) or several years (chicken, eggs - this is ongoing, not new) count as 'temporary'. Maybe, but these are much more structural, not temporary. And dropping beef and chicken from the 'average lunch' has a huge impact on what that average lunch is (and hasn't happened; beef and chicken are still very much part of it, just at a higher price point).

My point remains: the price of that 'average lunch' has roughly doubled (in non-constant dollars, obviously) from the mid-2010s to the mid-2020s. Base wages (in non-constant dollars) have nowhere near doubled. Food prices are tracking with something entirely different than wages.

I can see a fairly persuasive argument up until fairly recently, but I'm not at all sure that's not mere correlation. Even if it is, the most recently period seems to be a major exception.

If one assumes lunch prices track wages, one would assume lunch prices are about to either drop or remain constant for perhaps a decade to allow wages to catch up.