THE QUESTION:
What Percent of Current Inflation is Justified?
Does the Rise in Production Costs Justify Price Hikes by Companies?
Summary Cost Categories
LABOR
MANUFACTURE / OPERATIONS
As we can see from the graph, while businesses experienced significant inflation in terms of raw materials and operations costs, employment costs for the same period have consistently lagged behind. The graph above was made using the BLS figures for October 2022. As opposed to 7.7% inflation for consumers, producer prices inflation was up by 8% where as the rise of employment costs was seen by 5%. The BLS excludes the agriculture industry from these figures. All other occupations are covered in their employment costs estimates, inclusive of both public and private sectors. On the surface, it seems employers have responded positively to the demand in salaries and benefits increase by the USA’s labor force. However, the raises still lag behind the extent to which prices have been going up for consumers. This picture changes completely as soon as you hold the dollar value constant.
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