During the pandemic, there was a significant shift in American work. A population of employees enjoyed telecommuting, gasoline savings and decreased expenses generally. See Economy Intelligence. Forbes notes that employee spending was decreased even in regard to necessities such as health care. So, essentially consumption slowed. There were rumors that restaurants and retail actually closed or altered hours of operation. I cannot attest to that firsthand, as it did not happen here in Paradise, but rumors persist.
There was generalized angst that without consumers the producers would lose money. Without diners, a restaurant might not profit from food preparation. That was not calculus, but simple math. The government solution was to use piles of federal debt to provide ongoing support to those businesses. The purpose was to allow them to maintain payroll and support those workers, whether their efforts were necessary or not.
Eleven and one-half million "loans" were issued. That is a euphemism. Loans are typically a "grant of temporary use." They are used and then paid back. It is a simple concept that is becoming alien to Americans. All kinds of people now think that "loan" is a synonym for "gift." The implications are beginning with those 11.5 borrowers. ProPublica says that $790 billion was "loaned" and the government "forgave" $757 billion. It was never paid back. It never will be. You can see who got the money by searching on that ProPublica page.
The St. Louis Federal Reserve Bank has analyzed whether this was sound and made some interesting observations. First, "the PPP was not well targeted. Only about one-quarter of PPP funds supported jobs that otherwise would have disappeared." Thus, government money paid workers that businesses could or would have paid. As concerning "The PPP’s benefits flowed disproportionately to wealthier households rather than to the rank-and-file workers that its funds were intended to reach." Whether the plan was successful or not is left to the reader.
But, in the end, the supply of money in the market increased. It was largely conserved (saved) by workers because of the rumored lack of opportunity for spending. The San Francisco Federal Reserve Bank notes that "U.S. households built up savings at unprecedented rates following the strong fiscal response and lower consumer spending related to the pandemic." The result was referred to as a "savings glut."
In multiple instances, I heard from people who claimed that money literally "appeared" in their bank accounts. They had not asked for the money. They frankly admitted that they did not "need" the money. To a person, however, they certainly kept the money. And they waited.
When the pandemic ended, some portion of the population did not rush to return to work. They had enjoyed the deferral of expenses through mortgage forbearance, eviction moratoriums, and load deferrals. There were help-wanted signs everywhere as businesses strove to meet the demands of customers venturing back into the world at large, out there beyond Paradise. The U.S. Chamber of Commerce noted a noticeable labor shortage.
When there is a shortage, in instances in which demand outstrips supply, the price of goods and services increases. That is a natural consequence of "scarcity," and a common economic issue. Post Covid-19, there were people with money to spend, and businesses wanted to serve them. Thus, pay increased for the labor that did exist. That led to more money in the marketplace, thus resulting higher demand for goods and services. This, coupled with the already constrained supply, may have edged prices higher still.
After the pandemic, people were upset that rents increased. Some could not understand that landlords had been unable to enforce leases for months. Some tenants had stopped paying rent, but remained in the apartment/home. The landlord's payments (mortgage, maintenance, etc.) continued, but their income dried up. When normalcy returned, who did not expect those landlords to strive to recoup their losses? Nonetheless, many complained.
Retail faced product shortages. The lack of workers in world markets beyond little spots like Paradise meant that products were not being produced, shipped, unloaded, and delivered timely either. Thus, a decrease in supply of goods and a resulting change in the price equation. Prices rise when demand remains constant and the supply decreases. PBS reported on this extensively.
More recently, there is news of increases in fast food prices. The internet is alive (apparently) recently with people upset that a sandwich is now selling for $5.00. Some say it is "outrageous." The author of the article found one cheaper than $5.00, but assured nonetheless the sandwich "isn't nearly as affordable as it used to be." Well, what is as affordable as it used to be?
That there is outrage is interesting. When the price of a product doubles, there may be reason. First, when you double the price of labor from $7.50 per hour to $15.00 per hour, you might think there is a possibility that the price of the output (sandwich) might also double. And you have to remember that the price of the shop's labor is not alone in rising. The people that sweep up at the chicken packing plant, the people that pack the boxes, load the trucks, and more all rose with the mandated increase in our average weekly wage. Inflation hurts.
The price of inputs increases, and the price increases. The supply of money increases, and there is greater demand, and the price increases. A lunatic invades a country halfway around the world and destroys or isolates crops, food supply diminishes and prices increase. The astounding aspect of the news stories is that consumers are genuinely surprised that prices are increasing. Forgive student loan debt, and it is the same as the government printing millions of dollars and dumping them into the economy.
The lenders are getting paid, your government is printing or borrowing the money to pay loans. I always assumed that my car would never depreciate. I always thought I would get pay raises year after year after year. I was wrong. The car turned into rust and quit working. I still owe money on it. Should the government step in and pay off my car loan because I (1) overbought, (2) miscalculated, (3) succumbed to slick marketing by charlatans, (4) was wrong? Whether it should or not, it backed loans that were bad investments and now it is printing money to pay those loans. Thus, inflation.
The general public, it seems, simply does not grasp supply, demand, and inflation. The results are unfortunate and frustrating. That is a given. But surprising? Not so much. What is the solution? More debt? More government cash payments to consumers? Incurring more government debt for canceling personal debts and obligations? Maybe not so much.
That people are upset is clear. Reuters reports that people hate inflation and that "runs deep." The Wall Street Journal says that it is hitting them on groceries, utilities, rent (the essentials). All that government debt ($32 Trillion this morning and rising fast) will consume ever-increasing portions of the national budget. Tomorrow is mortgaged (deeply). Will anyone forgive the government's debt? Or will taxes increase to cover the largesse of unsolicited checks and bailouts? Or will services decrease to cover the largesse, e.g. less police protection, crumbling infrastructure, etc. (sorry, that is already happening).
With all of this on the scope, the big story is that a particular sandwich is now more expensive. Go figure. There are some who believe it can be difficult to see the forest for the trees. The result will be disaffected workers. There will be those working two jobs to make ends meet. They are the ones that won't qualify for the government largesse, the ones that pay their student loans (and other commitments), the ones we used to refer to as our middle class. They used to make a good living here, for instance building cars, before the consumers switched to foreign labor, Toyotas, Hyundais, BMWs, and more.
There will be staff instability. People will be shifting jobs, searching for better pay. That is a natural trend but enhanced in this economic setting. Business will struggle, labor shortages will persist, and those in the workforce may become frustrated. That could lead to more job changing as well.
In short, there are implications in the workplace that could well mean more fatigue, persistent presence of inexperienced workers, and thus management distracted from production by training. In short, it is a prime time for businesses and employees to focus on safety, accident avoidance, and worker well-being. While the economic woes wrought by the government will be harmful to the working people, there is no excuse for being complacent in the occurrence of accidents and injuries that will only make matters worse (for business, fewer workers and less-experienced workers; for the worker - well obviously).
No one can stop the reckless flow of money. No one can personally impede the inflation juggernaut. At best, we can affect our own environment. A great focus in that regard is workplace safety. That would be a better focus for us all than a $5.00 sandwich that was as inevitable and predictable as the sunrise. Get over inflation you cannot change and focus on what you can control. Safety is a great place to start. Or, you could join the next movement and strive to double the minimum wage to $30. That has to be good for everyone right? Sure, but don't complain when your chicken sandwich price doubles again.
