136or142
Adam T
Junior Chimp
Posts: 7,434
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« on: December 02, 2017, 09:12:40 AM » |
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« edited: December 03, 2017, 02:56:21 AM by 136or142 »
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This is actually one of the major reasons why economists think a little inflation is a good thing.
What psychologists have found is that people have an aversion to loss, but that a loss can be hidden if it doesn't seem real. So, if you have zero inflation but if a business can't afford to pay its workers what it's already paying them, psychologically the workers will resist be given an actual pay cut.
However, if you have two or three percent annual inflation, a business that can't afford to pay its workers what it was paying them at the beginning of the year, can simply not increase wages and give the workers a de facto pay cut while the workers psychologically won't feel the same reduction in pay. Of course, this can only work for so long.
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