December 13, 2017

The chicken or the egg

When commodities prices rise in a country, those who are hardest hit are the poor including lower-level government and private sector employees and the unemployed. As a result, governments are forced to consider increasing salaries and wages and creating job opportunities for the jobless. When the wages and salaries are raised, commodities prices go up again. It is this cycle of price rise and pay increase that some countries in the world cannot emancipate themselves from. This is the problem of the chicken and the egg. What comes first, the chicken or the egg? Which comes first, increased prices or the pay rise?
However, it is clear that prices are always increasing whether the minimum wage or salaries of government and private sector workers are raised or not. Prices may rise due to the inflow of foreign investment, development projects, inflation, land speculation, smuggling, import or export businesses and so on. For example, property and rental prices in some cities in some countries skyrocket due to surges in foreign investment. As a result, the urban poor there have to move away from city centres but they still have to pay more for their accommodation as property rental prices rise. Their usual food items become expensive as crops, meat and fish are exported to other countries. Peasant farmers who have traditionally tilled the land have to find alternative avenues of livelihood due to imported food items. To make a long story short, they cannot afford the cost of living and their living standards fall dramatically. Clearly they are the people hardest hit by rising prices, whether prices rise because of higher income or not. It is high time for the chicken-and-egg causality dilemma to be solved for such countries.

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