Remote Work And The Inflation Crisis, Does Larry Fink Have A Solution?
Annual inflation in the United States hit 8.5% in September of 2022.
That’s a problem for everyone and Blackrock CEO Larry Fink thinks he has a solution – one that remote workers won’t like, but is he right?
What Is Inflation?
Firstly, we should take a quick look at what we mean by inflation. Simply put, inflation, according to Investopedia, is a measure of the rise in prices of goods and services within an economy. This translates to a drop in the purchasing power of your money.
So, if inflation is 8.5%, to buy the same things as you could buy for a dollar last year, you need to spend a dollar and 8 cents this year.
That can add up to quite a bit of lost money, for a family.
The average salary in the US according to the BLS is $56,310.
That means if you had no pay rise this year, your $56,310 will only buy what $51,898 would have bought you last year.
An effective pay cut of $4,412!
What Is The Inflation Crisis And What Is Causing It?
Now inflation isn’t always a bad thing, in fact, we need a small rate of inflation in order for economies to grow. And typically inflation of around 2% a year is accepted as a good thing.
That means as long as you get a pay rise of more than 2%, your spending power will increase and the price of goods will rise without impacting you and your family.
It becomes a crisis, however, when inflation starts to outpace wage rises. And while things are pretty bad in the US with an inflation rate of 8.5%, you might want to consider the people of Turkey who are currently dealing with a rate of 80%! That’s really going to sting.
What caused this inflation?
There is no single cause for our current crisis.
However, the pandemic lockdowns and the government’s actions during them did two things that didn’t help – they reduced the supply of goods in the market (because people couldn’t work to make them) and they increase the money supply (as the government printed money to help people out while they were locked down).
Then, in addition to this, the rush to reduce America’s dependence on oil in favor of “green energy” and the war in the Ukraine which has reduced the global supply of oil and gas to Western economies are also major factors.
Both have had a knock-on effect of increasing the price of manufacturing as well as distributing all goods and most services.
So, What Does Larry Fink Want To Do About This?
Larry Fink, CEO of Blackrock, the largest, richest and most powerful business on Earth, has decided that everyone needs to go back to working in an office to solve inflation.
He wants people to stop working from home.
His reasoning is that people work harder and become more productive in the office than they are at home.
When people produce more for the same money, supply of goods and services increases, and this puts a downward pressure on prices.
Yes, Larry’s solution to inflation is to put an end to remote working.
Does That Mean Remote Working Should End?
Well, no. Just because Larry Fink is a rich and powerful man, it doesn’t mean that he’s any smarter than anyone else.
The truth is that his demands fly in the face of the facts.
Firstly, people want to work remotely. If they are made to work in an office – they quit their jobs.
No business becomes more productive by losing staff. Even ultra-conservative companies like PWC have had to accept this is the reality of work in 2022.
Then, there’s the issue that there’s a ton of research which shows remote workers are more productive (or at least, they think they’re more productive, as with this recent survey conducted by the software company Citrix).
And finally, there’s the fact that worker productivity is already showing healthy growth and inflation is not improving.
In short, inflation is not being caused by remote workers, at least, not based on the evidence.
Inflation is being caused by the way global governments are behaving and the way that the market is reacting to that behavior.
Larry Fink may be an accomplished businessman but his way of thinking seems trapped in a now defunct age.
Remote working is unashamedly here to stay and putting a stop to it, would only make people unhappy, whilst doing very little about inflation.