Important Juncture of Economic Growth.
We are at a juncture in which economic progress is about to boom. Everyone in the industry knows it. But fear to proceed, because of inflationary apprehensions. Industry fears to expand and grow at a phenomenal rate, post-COVID, even with abundant high-quality human resources in the market. Artificial Intelligence made redundant jobs obsolete and freed up more human resources, further increasing the availability of highly skilled professionals. AI is not causing job loss. However, the Industry is not expanding with more jobs at a rate, AI is making the industry grow. Because the Industry fears inflation will go to uncontrollable levels.
Skilled and Unskilled Labor
We have to promote both skilled and unskilled workers' job prospects by expanding Manufacturing, High-Tech, and Services Industries. The real value of money lies in a country's Human Resources, not in Gold or Printed Notes. We have to promote Small Businesses in Developed and Developing Countries. At this Juncture, we have a more young workforce with the necessary technology and tools than ever before in history. We need to promote AI-assisted Manufacturing and Automation so that the Industry gains from the scale and quality of products. The Unskilled Workforce also gains from fewer defects in their work of finished products and the convenience of using AI.
Let us discuss the ill effects of Inflation because of Industry Expansion and Solutions for it
1. Money loses its value
It has always been this way in the entire life cycle of the dollar. You can argue that a $10 bill will lose its value if inflation increases. What costs $10 will cost $15, if inflation increases. The abundance of wealth will increase the purchasing power of the people. It will promote investment as people will not put their money in banks alone. The people who saved money for years will lose their value unless they do business and earn new abundant wealth, in case they are a working class with no assets. But, even if you are a salaried professional, If you own an asset, its value increases during Inflation. In the case of pensioners, the Government should support them financially with an increase in their pensions. Money will not remain in safes but will go to stock markets, further boosting industrial growth. We can't stop growth, just to preserve old wealth simply sitting ideally in banks. Anyways Asset value and Salary of the people are going to increase.
2. Inequality raises
This can be dealt with only if low-income households go to work and earn new standards of salary, which is way higher than they saved. To deal with inequality, we have to promote more manufacturing jobs and ancillary industries. Open high-class Industrial Training Institutes. Women should be given enough opportunities to work. be it in the corporate sector or even in jobs like Supermarkets. The minimum wage should be increased. Salaries have to go up for both skilled and unskilled workers in both manufacturing and tech jobs simultaneously. Asset prices will increase due to inflation. But since both Skilled and Unskilled workers are paid higher wages, they can deal with that raise.
3. Increase in money value
Prices inflate and the money supply will expand because of inevitable inflation caused by the booming of the economy. A country's currency value against other currencies will not decline. Because the other country is also booming and has the same high inflation too. It is a world phenomenon, not restricted to one country alone.
4. Impact on the cost of borrowing
Financial institutions will raise their interest rates to protect themselves from inflationary pressures. Even if they raise interest rates, Industry will borrow, since it will see a huge profit margin on its borrowings, if it expands fast. Naturally, this will tend to an adjustment in the interest rates. Remember Markets determine the interest rates. So, even if initially interest rates are high, the higher interest rates will slow down, once this high booming period is allowed to reach its maximum potential. Later it will calm down with lower interest rates.
5. Increased cost of Living
Since, with the increased cost of living, salary also increases for all sections of society, they will be able to afford products as earlier. If we bring all taxpayers slab to a single slab, with a 10% tax, there will not be an increase in the number of high-earning people pushed to higher levels of tax bracket disproportionately.
Conclusion
In the long run, after the job market and the Industry adjust itself post-COVID and high inflation, the actual price of goods and services will decrease compared to the salary, for all sections of society. There is going to be a reset in the World Economy. Even if the Federal Reserve is Conservative and does not decrease the interest rates, the Industry has to adjust itself by expanding without doubts or hindrance.
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