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Tuesday 9 August 2011

Sticky salaries and wages

Sticky salaries and wages

The constant real value non–monetary items salaries and wages are generally sticky downwards: it is not easy for firms to reduce them in nominal value. It is, of course, very, very easy to reduce their real values during inflation: just keep them the same or increase them at a rate lower than the inflation rate. People are apparently agreeble to accept the latter option which means a reduction in real value. People are very unhappy to accept a reduction in nominal value of salaries and wages.

It may happen that it could be some time before the concept of enhanced economic stability during deflation via financial capital maintenance in units of constant purchasing power (CIPPA) is generally accepted. Salaries and wages would then be automatically decreased in nominal value by means of measurement in units of constant purchasing power while their real values would stay the same during deflation. This would improve economic stability substantially and help central banks in their task of getting the economy into a low inflationary mode again. It would also reduce the level of the monetary effect of a lower general price level during deflation.

Salaries and wages are already being decreased in nominal value in the labour market during deflation, but, not yet automatically as a normal accounting practice by measuring them in units of constant purchasing power in terms of the negative change in the CPI.

A possible practical way of overcoming the opposition people have in accepting a decrease in salaries and wages during months of negative monthly inflation while the annual inflation rate is still positive (during inflation and disinflation) would be the following:

Employment contracts could state that salaries and wages would be updated (there is no stable measuring unit assumption under IFRS-authorized financial capital maintenance in units of constant purchasing power - CIPPA) in terms of the Daily Index while the DI value is increasing. When it decreases as a result of a period of negative monthly inflation while the annual inflation rate is still positive, salaries and wages would be kept fixed in nominal value during that period in order to give employees certainty as to the amount of money they will receive at month end. They would, of course, be receiving more in real value during the period their salaries and wages are fixed with a decreasing DI. As soon as the Daily Index turns positive again salaries and wages will be updated again in terms of the increasing DI, but, only after allowing a recoupment of the period of the decrease in the DI while annual inflation was still positive. Thus, their salaries and wages would be kept fixed for a little longer while the DI is already increasing. They would, of course, be receiving less in real value during the period their salaries and wages are fixed with an increasing DI. Months of negative monthly inflation during a year of positive annual inflation are normally limited to one or two consecutive months. The net effect to salaries would be the same as always updating them in terms of the DI whether it was increasing or decreasing during continuous annual inflation and disinflation. Neither employers nor employees would be negatively affected in the above case.

During deflation a different approach is required because keeping salaries fixed in nominal value during deflation means their real values are increasing daily and may after some time severely affect entities´ ability to maintain stability in their operations during deflation which may result in layoffs affecting employees in the worst way. On the other hand, employees need certainty about how much money they will receive during the current year in their contracts also during deflation.

Employment contracts could state that during deflation salaries and wages would be kept fixed during the contract year in which the economy first enters into deflation. Contracts could then be agreed to be renegotiated at the end of that contract year and yearly thereafter while the economy remains in deflation with a view to decreasing the nominal values of salaries and wages (not their real values) in a predictable manner in line with deflation. Their real values would remain the same or increases in real terms could be negotiated. It could then also be negotiated to increase salaries and wages in real terms by keeping them fixed during deflation depending on each entities´ specific circumstances.

Nicolaas Smith

Copyright (c) 2005-2011 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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Monday 8 August 2011

Daily CPI - South Africa

Daily CPI - South Africa

The Daily Consumer Price Index is a lagged daily interpolation of the Consumer Price Index. Daily CPI Formula.

Unit of account: Rand

CPI 2008 = 100

CPI Aug 2011 118.30 Published on 21-09-11


18-Out-2011 118,570
17-Out-2011 118,563
16-Out-2011 118,556
15-Out-2011 118,550
14-Out-2011 118,543
13-Out-2011 118,536
12-Out-2011 118,530
11-Out-2011 118,523
10-Out-2011 118,516
9-Out-2011 118,510
8-Out-2011 118,503
7-Out-2011 118,496
6-Out-2011 118,490
5-Out-2011 118,483
4-Out-2011 118,476
3-Out-2011 118,470
2-Out-2011 118,463
1-Out-2011 118,456
30-Set-2011 118,449
29-Set-2011 118,443
28-Set-2011 118,436
27-Set-2011 118,429
26-Set-2011 118,423
25-Set-2011 118,416
24-Set-2011 118,409
23-Set-2011 118,403
22-Set-2011 118,396
21-Set-2011 118,389
20-Set-2011 118,383
19-Set-2011 118,350
18-Set-2011 118,318
17-Set-2011 118,285
16-Set-2011 118,253
15-Set-2011 118,220
14-Set-2011 118,188
13-Set-2011 118,156
12-Set-2011 118,123
11-Set-2011 118,091
10-Set-2011 118,058
9-Set-2011 118,026
8-Set-2011 117,994
7-Set-2011 117,961
6-Set-2011 117,929
5-Set-2011 117,897
4-Set-2011 117,864
3-Set-2011 117,832
2-Set-2011 117,800
1-Set-2011 117,767
31-Ago-2011 117,735
30-Ago-2011 117,703
29-Ago-2011 117,670
28-Ago-2011 117,638
27-Ago-2011 117,606
26-Ago-2011 117,574
25-Ago-2011 117,541
24-Ago-2011 117,509
23-Ago-2011 117,477
22-Ago-2011 117,456
21-Ago-2011 117,435
20-Ago-2011 117,415
19-Ago-2011 117,394
18-Ago-2011 117,373
17-Ago-2011 117,352
16-Ago-2011 117,332
15-Ago-2011 117,311
14-Ago-2011 117,290
13-Ago-2011 117,269
12-Ago-2011 117,249
11-Ago-2011 117,228
10-Ago-2011 117,207
9-Ago-2011 117,187
8-Ago-2011 117,166
7-Ago-2011 117,145
6-Ago-2011 117,124
5-Ago-2011 117,104
4-Ago-2011 117,083
3-Ago-2011 117,062
2-Ago-2011 117,042
1-Ago-2011 117,021
31-Jul-2011 117,000
30-Jul-2011 116,980
29-Jul-2011 116,959
28-Jul-2011 116,938
27-Jul-2011 116,918
26-Jul-2011 116,897
25-Jul-2011 116,876
24-Jul-2011 116,856
23-Jul-2011 116,835
22-Jul-2011 116,814
21-Jul-2011 116,794
20-Jul-2011 116,773
19-Jul-2011 116,752
18-Jul-2011 116,737
17-Jul-2011 116,721
16-Jul-2011 116,706
15-Jul-2011 116,691
14-Jul-2011 116,675
13-Jul-2011 116,660
12-Jul-2011 116,645
11-Jul-2011 116,629
10-Jul-2011 116,614
9-Jul-2011 116,598
8-Jul-2011 116,583
7-Jul-2011 116,568
6-Jul-2011 116,552
5-Jul-2011 116,537
4-Jul-2011 116,521
3-Jul-2011 116,506
2-Jul-2011 116,491
1-Jul-2011 116,475


Disclaimer: The numbers presented here are accurate to the best knowledge of the author, but no warranty is expressed or implied that they are accurate or appropriate for use in contracts.

Copyright (c) 2005-2011 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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Daily CPI - Portugal

Daily CPI - Portugal

The Daily Consumer Price Index is a lagged daily interpolation of the Consumer Price Index. Daily CPI Formula.

Unit of account: Euro

CPI 2008 = 100

CPI August 2011 103.648  Published on 12.09.2011

12-Out-2011 103,618
11-Out-2011 103,633
10-Out-2011 103,648
9-Out-2011 103,664
8-Out-2011 103,679
7-Out-2011 103,694
6-Out-2011 103,709
5-Out-2011 103,724
4-Out-2011 103,739
3-Out-2011 103,755
2-Out-2011 103,770
1-Out-2011 103,785
30-Set-2011 103,800
29-Set-2011 103,815
28-Set-2011 103,831
27-Set-2011 103,846
26-Set-2011 103,861
25-Set-2011 103,876
24-Set-2011 103,891
23-Set-2011 103,907
22-Set-2011 103,922
21-Set-2011 103,937
20-Set-2011 103,952
19-Set-2011 103,967
18-Set-2011 103,983
17-Set-2011 103,998
16-Set-2011 104,013
15-Set-2011 104,028
14-Set-2011 104,043
13-Set-2011 104,059
12-Set-2011 104,074
11-Set-2011 104,089
10-Set-2011104,092
9-Set-2011104,094
8-Set-2011104,097
7-Set-2011104,099
6-Set-2011104,102
5-Set-2011104,104
4-Set-2011104,107
3-Set-2011104,109
2-Set-2011104,112
1-Set-2011104,114
31-Ago-2011104,117
30-Ago-2011104,119
29-Ago-2011104,122
28-Ago-2011104,124
27-Ago-2011104,127
26-Ago-2011104,129
25-Ago-2011104,132
24-Ago-2011104,134
23-Ago-2011104,137
22-Ago-2011104,139
21-Ago-2011104,142
20-Ago-2011104,144
19-Ago-2011104,147
18-Ago-2011104,150
17-Ago-2011104,152
16-Ago-2011104,155
15-Ago-2011104,157
14-Ago-2011104,160
13-Ago-2011104,162
12-Ago-2011104,165
11-Ago-2011104,167
10-Ago-2011104,170
9-Ago-2011104,172
8-Ago-2011104,180
7-Ago-2011104,188
6-Ago-2011104,196
5-Ago-2011104,203
4-Ago-2011104,211
3-Ago-2011104,219
2-Ago-2011104,227
1-Ago-2011104,235
31-Jul-2011104,242
30-Jul-2011104,250
29-Jul-2011104,258
28-Jul-2011104,266
27-Jul-2011104,274
26-Jul-2011104,281
25-Jul-2011104,289
24-Jul-2011104,297
23-Jul-2011104,305
22-Jul-2011104,313
21-Jul-2011104,320
20-Jul-2011104,328
19-Jul-2011104,336
18-Jul-2011104,344
17-Jul-2011104,352
16-Jul-2011104,359
15-Jul-2011104,367
14-Jul-2011104,375
13-Jul-2011104,383
12-Jul-2011104,391
11-Jul-2011104,399
10-Jul-2011104,406
9-Jul-2011104,408
8-Jul-2011104,410
7-Jul-2011104,412
6-Jul-2011104,413
5-Jul-2011104,415
4-Jul-2011104,417
3-Jul-2011104,419
2-Jul-2011104,420
1-Jul-2011104,422

Disclaimer: The numbers presented here are accurate to the best knowledge of the author, but no warranty is expressed or implied that they are accurate or appropriate for use in contracts.

Copyright (c) 2005-2011 Nicolaas J Smith. All rights reserved. No reproduction without permission.
Posted by at No comments:
Labels:
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