Due to the earlier waves of Covid, production of non-medical goods saw a decline, and now that regular production has been picking up, the market is lagging behind. Due to the decrease production of important inputs such as raw materials and intricate parts, we are seeing input shortages that have made it difficult for American manufacturing companies to pick up where they left off. Along with the this, many people have refused to go back to work following the pandemic, which has caused a worker shortage all over the country. In fact, the Labor Department has reported 10.9 million open job positions in July, which is hard to believe considering the 5.2% unemployment rate that has been reported by the Fed. To aid with this problem, firms have been seen increasing their wage, subsequently increasing their prices. With the shortages in inputs and shortages in labor, we are seeing a two pronged attack on the price of goods and services. Due to the market being in disequilibria, we will certainly see improvement in the future, however. Due to the decentralization of the market system, the market will soon catch back up with production of inputs. To solve the problem of worker shortages, we will likely see innovation in capital that will replace workers with machines and computer programs in order to lower the currently inflated price of goods.
Source: https://www.cnbc.com/2021/09/08/businesses-are-feeling-stronger-inflation-and-paying-higher-wages-feds-beige-book-says.html
2 comments:
What I wonder is how long will it be before we see machines take over all manufacturing jobs? or if it will ever be actually worth the capital investment.
Not only businesses are willing to increase their wage, but the government is also considering it. During Biden's presidential campaign, he promised to increase the minimum wage. On April 27, 2021, he issued an executive order requiring federal contractors to pay a $15 minimum wage to hundreds of thousands of workers who are working on federal contracts. Increasing wages leads to higher inflation, thus prices will rise. Meanwhile, the number of workers will decrease because employees are not willing to hire more employers. In fact, they can just hire fewer workers, make them have more responsibilities, and have the same salary expenses as before.
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