Wage Inflation Does Not Necessarily Generate Inflation In The Short Term.

There are frequent news of raising minimum wages everywhere. Wage rise That is, the rising labor costs will further transmit the prices of goods and services to a "cost driven inflation". As for the relationship between wage inflation and inflation, the reporter interviewed pan Jian, deputy director of the China Economic Prosperity Monitoring Center of the National Bureau of statistics. He said in a clear sense: "the rise in wages of migrant workers is a good thing. As to whether or not it will cause inflation, there are many kinds of arguments. We need to clarify the problem, or return to the formation of inflation."

What is the cause of inflation? Pan Jiancheng said that in the theory of economics, there is a theory of quantity of money, which means that excessive supply of money will lead to inflation. The theory of demand pull refers to inflation caused by excessive demand, and the theory of cost push. Why does cost push inflation? Theoretically, this is possible. In a competitive market, prices are basically determined by supply and demand. Assuming that part of the enterprise's profit margin is very low, it may not be able to bear the pressure of rising costs. If demand is still large and there is no change at that time, then the relationship between supply and demand may change, which may lead to higher prices of products.

But, in Full competition In the market economy environment, especially in the presence of excess capacity, the withdrawal of some enterprises may not lead to a reduction in supply. At this time, the market price, because the demand side can be better than three stores and take the initiative, such as color TV, fridge and other traditional household appliances and clothing prices, no manufacturer can decide the price separately. For the supplier, although its labor cost is rising, if it is faced with oversupply or even overcapacity, it will not be able to sell the price. Because you have no pricing power, forcing enterprises to reduce costs by improving labor productivity, technological progress, or tap potential through management and marketing.

Pan Jiancheng from Theoretically After analysis, the trend of CPI and wage growth over the past 10 years is also compared. From the data of the past ten years, the curves on the chart are basically smooth, both nominal wages and real wages, that is, a steady growth. However, the curve of CPI is different. From 2000 to 2010, there was a slight deflation of price downward, a continuous moderate increase, and a relatively rapid rise stage. The comparison between the two forms of curve shows that the correlation between CPI volatility and nominal wages is not significant, while the correlation is not significant, and the correlation between lag is not strong.

Since the rise in wages does not necessarily bring inflation, what is the cause of inflation?

Pan Jiancheng believes that from the perspective of our history, it is mainly the price of agricultural products. This feature has been very good in recent years in the price trend. Taking the first half of this year's CPI, most of it is mainly caused by rising food prices. This year's summer grain is the third best harvest in history. The autumn grain is also stable at present. The planting area is increasing. Although some provinces are suffering from floods, if they manage well, there will be no big fluctuations.

As a matter of fact, whether wage increases lead to rising costs will not be a driving force for price rise. The key lies in whether enterprises can bear the rise of this cost. If the profitability of enterprises is good and the rise of human cost can be digested, the driving force for price rise will not be great. In the first half of this year, the profit of enterprises was relatively good, and the profit margin of sales continued to rise. This shows that the first half of the business is still very good. In the second half of the year, even if there are some difficulties, it may be able to digest.

In the long run, wages and prices will rise, and wage increases will be much higher than price increases. "As I mentioned before, the future price is not mainly due to, or not directly because of wage rise, or depends on the change of supply and demand. To some extent, the change of supply and demand depends on the way of increasing supply. For example, at present, wage increases force enterprises to upgrade their technology and bring about two results: first, by improving efficiency and keeping profits, the pressure on price increases due to the increase in human costs is reduced; two, because of the upgrading of equipment, the demand for labor in unit output decreases, resulting in an increase in employment pressure, which will further affect the wage increase and will not enter the cycle of rising wages and prices. Pan Jiancheng said.

"Although the data from nearly 10 years can be concluded that the correlation between wage inflation and inflation is not significant, wage inflation does not necessarily generate inflation in the short term, but it is necessary to prevent inflation expectations arising from it," Pan Jiancheng cautioned. He believes that the change of expectation is faster than the real supply and demand relationship, leading to the emergence of real inflation. "It is expected that the supply and demand will be changed, and those who sell will not be sold and hoarding up. The buyers will buy more than they need, leading to price increases. Therefore, managing inflation expectations is not the same thing as preventing inflation. This year, the inflationary pressure caused by supply and demand is not large. The key is to prevent the rise of inflation expectations due to the amplification of some individual products, such as the rise of garlic or the rise in wages of migrant workers.