Wages and Inflation

In order to understand poverty and what people are going through you have to understand it from their point of view and living conditions.

A good movie that helps preview that to people and help better understand it is the movie The Pursuit Of Happiness. This is a really good movie describing the story of a single dad barely being able to afford rent and having to go paycheck to paycheck in order to make ends meet. Not to mention also being a father figure to his kid.

This movie describes a lot of families around the world. Not being able to afford to take care of your family. That takes a toll on a person’s mental health.

Wages and Inflation

After COVID-19, businesses decided to increase their wages after workers decided to strike. With wages increasing so is inflation. Inflation in 2020 was at 1.4%, then skyrocketed to 7% in 2021 and later after they increased wages is at an all time high of 7.9%. And it doesn’t show signs of slowing down anytime soon. This is making taxes higher and making prices of goods even more expensive. These inflation rates have been adding to the poverty rates and making them skyrocket too.

“Inflation increases poverty, the problem of poverty is aggravated when the prices of commodities increase. Inflation is therefore considered as ‘cruelest tax ‘on the poor. Cardoso (1992) argued that inflation increases poverty in two ways: Inflation tax reduces disposable real income. Another reason is that when nominal wages increase less than the price of goods consumed by wage earners then automatically the worker’s real wages decline”(2019).

This article communicates inflation and poverty have a direct correlation to each other. Inflation and the taxes being paid is for the poor to become poorer and the rich get richer.

Fix To Inflation

To fix inflation businesses need to lower the price of goods and the government has to come up with a way to lower taxes for lower income people. Then the rich make up the rest of the tax money and work to prevent tax evasion within the system. Less write offs for people who make over a certain amount.

Work Citied

Paul, Mahua and Sharma, Pooja, Inflation Rate and Poverty: Does Poor become Poorer with Inflation? (February 4, 2019). Available at SSRN: https://ssrn.com/abstract=3328539 or http://dx.doi.org/10.2139/ssrn.3328539

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