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is my employer being unreasonable?
Comments
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Because they wanted growth as opposed to a contraction in the economy which could have led to massive job losses.Yes they can use the base rate as one tool. QE or money printing is another (though these aren't the only tools available). Why then is it that while inflation has been persistently above target have they bank been printing money and keeping interest rates low, which is exactly the opposite of what you would do if you wanted to reduce inflation?0 -
Yes they can use the base rate as one tool. QE or money printing is another (though these aren't the only tools available). Why then is it that while inflation has been persistently above target have they bank been printing money and keeping interest rates low, which is exactly the opposite of what you would do if you wanted to reduce inflation?
keeping interst rates low does lower inflation, that's the whole point, if they were to increase the interest rate, inflation would shoot up, so they are trying to keep inflation low but loosing the battle or at least only achieving the lower levels with QE and low interest rates.0 -
That is totally different to your earlier point when you said that companies revenues were directly linked to inflation which means they could automaticaly afford at least inflation pay rises.
Apart from there being no direct link between inflation and revenue in any particular company, there is also no direct link between revenues and gross profits.
I didn't mean that an individual company can match its increases in revenue to he overall rate of inflation in the economy. I meant that inflation is price increases therefore, if in general companies increase prices, then revenues will increase and there will also be inflation.
However wages are not the only outgoing of a company and therefore there is a choice to be made around the relative levels of wages, capital investment, advertising spend etc etc. Overall in the UK wages are at a lower percentage of GDP now than they were in the 1970s because companies have chosen to decrease wage spend in favour of other things.0 -
Because they wanted growth as opposed to a contraction in the economy which could have led to massive job losses.
But that's not within their remit. So who is pulling the strings?
If the bank had genuine independence to act to keep inflation on target it would have increased interest rates.0 -
keeping interst rates low does lower inflation, that's the whole point, if they were to increase the interest rate, inflation would shoot up, so they are trying to keep inflation low but loosing the battle or at least only achieving the lower levels with QE and low interest rates.
Interesting theory but can you explain the mechanism by which a higher base rate could increase CPI inflation?0 -
GDP is not a measure of profitability, just activity. Wages and all the other things you mention can only be funded from gross profits in the long run.I didn't mean that an individual company can match its increases in revenue to he overall rate of inflation in the economy. I meant that inflation is price increases therefore, if in general companies increase prices, then revenues will increase and there will also be inflation.
However wages are not the only outgoing of a company and therefore there is a choice to be made around the relative levels of wages, capital investment, advertising spend etc etc. Overall in the UK wages are at a lower percentage of GDP now than they were in the 1970s because companies have chosen to decrease wage spend in favour of other things.
To get back to the OP, the employer may be being reasonable or not, without knowing the figures for that particular company it is impossible to say whether a rise is viable.0 -
depends which inflation figure to go by, if you accept inflation is a measure of the cost of living, then surely the RPI is the one to go by, as that does include mortgages and rents, interest rates are keeping those low, when they do go back to normal, the CRI will be even worse than it is now, the BoE has very little conrol on CRI, keeping interest rates low, means more money in peoples pockets, which helps keep inflation low.
Low interest rates have helped fuel house price increases (inflation), which is one reason why RPI is higher than CPI, not the opposite as you suggest. But the Bank of England remit is not to control RPI inflation so I'm not sure I understand your point.0 -
GDP is not a measure of profitability, just activity. Wages and all the other things you mention can only be funded from gross profits in the long run.
To get back to the OP, the employer may be being reasonable or not, without knowing the figures for that particular company it is impossible to say whether a rise is viable.
It's a long time since I learned basic accounts but I thought that as wages are a cost of sales they are subtracted from sales before calculating gross profit?
Re the OP, you're right, OP would need to know the situation of his own company to know whether it's viable for his real income to remain constant over time. As I said, take a look in the executive car park. If you can see chauffeurs and recent registration plates chances are they could have spent that on wages instead. If the boss hasn't changed his car this year and the chauffeur is part time or redundant then chances are they didn't have the money or spent it on something else.0 -
Interesting theory but can you explain the mechanism by which a higher base rate could increase CPI inflation?
Because RPI and CPI are directed affected by each other, if interest rates were to raise, mortgage/rents would raise too, reducing the money avaible in people pockets, which reduce demand, reduced demand raises prices, if I'm only making 10 ipads instead of 100 the price goes up, so does inflation.0 -
Low interest rates have helped fuel house price increases (inflation), which is one reason why RPI is higher than CPI, not the opposite as you suggest. But the Bank of England remit is not to control RPI inflation so I'm not sure I understand your point.
I didn't say RPI was lower than CPI, but that RPI was unnaturally low, because of interest rates being kept low.0
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