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Debunking 5 top inflation myths
https://www.epi.org/blog/debunking-5-top-inflation-myths/The labor market is largely strong right now, but inflation continues to be a pressing economic concern.
The reasons for escalating inflation are hotly debated, but some theories gaining traction have not been grounded in the data. EPI research sets the record straight on the causes of inflation—and how policymakers can best restrain it. Below, we debunk 5 top inflation myths.
Myth #1: Workers’ wage growth is driving inflation. Nominal wage growth—while faster relative to the recent past—has lagged far behind inflation, meaning that labor costs have been dampening, not amplifying, inflationary pressures all along.
Myth #2: Corporate profits are not contributing to inflation. In fact, fatter corporate profit margins have driven over half of the increase in prices in the nonfinancial corporate sector between the second quarter of 2020 and the end of 2021. This is not normal. From 1979 to 2019, profits only contributed about 11% to price growth. Ignoring the role of profits makes inflation analyses a lot weaker.
. . .
The reasons for escalating inflation are hotly debated, but some theories gaining traction have not been grounded in the data. EPI research sets the record straight on the causes of inflation—and how policymakers can best restrain it. Below, we debunk 5 top inflation myths.
Myth #1: Workers’ wage growth is driving inflation. Nominal wage growth—while faster relative to the recent past—has lagged far behind inflation, meaning that labor costs have been dampening, not amplifying, inflationary pressures all along.
Myth #2: Corporate profits are not contributing to inflation. In fact, fatter corporate profit margins have driven over half of the increase in prices in the nonfinancial corporate sector between the second quarter of 2020 and the end of 2021. This is not normal. From 1979 to 2019, profits only contributed about 11% to price growth. Ignoring the role of profits makes inflation analyses a lot weaker.
. . .
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