See, most people only have one job, so one source of payment. But they have N expenditures: health, food, electricity, transportation.
If inflation increases those general prices 20%, that’s 4 (or 5, or 6, or…) 20% increases in cost. Since currently wages are already lower than the cost of living, a raise in pay mirroring inflation would allow it to cover for one of those increases, on average, so the employee now has actually become poorer than before.
Actually, they should more-than-mirror inflation.
See, most people only have one job, so one source of payment. But they have N expenditures: health, food, electricity, transportation.
If inflation increases those general prices 20%, that’s 4 (or 5, or 6, or…) 20% increases in cost. Since currently wages are already lower than the cost of living, a raise in pay mirroring inflation would allow it to cover for one of those increases, on average, so the employee now has actually become poorer than before.