A poor job market isn't always just a rain on the parade of American workers; sometimes it comes with a silver lining. This time Federal Reserve Chairman Ben Bernanke is banking on the poor job market being the silver lining that keeps inflation away. In the past raises contributed to inflation as employers raised wages and then prices and then started all over again. This time around the Federal Reserve feels like employees won't push for the raises they want due to the poor economy and job market.
It will be interesting to see if the recent 12% increase in minimum wage plays into the inflation as well as the fact that by nature the majority of people think they are underpaid. While I can easily see the employers getting behind this logic the general public won't be as quick to jump on the boat. Even though the Fed's current plan isn't the most appealing to you and me, their hands are tied because the market won't likely bear the increased interest rates which would normally be used to fight inflation.
It's interesting that the rates need to stay low due to bad decisions made in the lending industry over the past few years and now, we can't take the standard actions to fight inflation because it could hurt these same industries. Bernanke is depending on the average American to forgo a raise this year to essentially boost up the economy while enduring the hardest part of the current economic state. Despite Ben's hope and the fact that it could contribute to inflation I plan to seek a raise later this year due to additional responsibilities and my performance. Even in this tight job market I think the increased costs that consumers are facing at the pump, the grocery store and for shelter will push many of them to ask for a raise too.
Uncle Sam wants you. . . to skip your raise