Wage Inflation

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Kbg
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Wage Inflation

Postby Kbg » Fri Jan 12, 2018 9:44 am

It will be interesting to see if wage inflation is beginning to resurrect itself after a very long hiatus. Clearly the labor market is getting tight enough that companies have to compete for employees again. I imagine $11 goes a lot further in Arkansas than $15 does in California.

Thoughts and opinions?
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Tortoise
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Re: Wage Inflation

Postby Tortoise » Sat Jan 13, 2018 5:49 pm

Yes, I think over the next few years we'll see some inflation, including wage inflation. In fact, I think we're already starting to see it.

I recently bought a fixer-upper house, so I've been talking to a lot of contractors over the past month. Most of them have mentioned that they're unusually busy, despite this historically being a slower time of year for them. A couple of them surmised that it's because the economy is doing very well and people are starting to spend more money on home improvements. One of the contractors said he's so busy that he's completely booked six months in advance, so he's looking to expand and hire more workers. Another one said that the 2018 tax changes are pushing her company into a much lower tax bracket, and she'll be passing most of the savings on to her employees -- so their compensation will be going up quite a bit.

Even my end-of-year house purchase itself was extremely competitive, despite the holidays being a historically slow time of year for real estate transactions. We competed with five other offers on the house. There are tons of home buyers out there right now with money to put down, banks are more willing to lend than they were 7-10 years ago, and housing inventory is very low, all of which are conspiring to cause noticeable inflation in home prices.

This is all just my own anecdotal evidence over the past few months, but my perception has been that the economy is booming and people are starting to spend, spend, spend (general inflation). It's translating into most businesses getting busier, needing more workers, and probably also needing to pay workers higher wages to retain them (wage inflation).

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