Economics IA

Energy bills push inflation to 2019 high

750 words
This article tells us about the wage growth and the inflation of a certain country. The
problem started at april 2019 when there's an increase in inflation from 1.9% in March to 2.1% in
april. The inflation actually is above the 2% target that is expected by the Bank of England but is
lower than expected. The inflation is actually caused by the increase in energy bills. It rose
around 10.9% in March and 9.3% in April. Since people need to pay more energy bills, they
would try to increase their prices as a producer to get sufficient money. Ofgem (office of gas and
electricity markets) actually raised the maximum prices that can be charged for gas and
electricity to those who have not switched suppliers and are on default tariffs. This is why the bill
for energy is high and is why there is inflation.
Interestingly, the prices of games and computers actually decrease by 0.8% between
March and April 2019. This could only mean one thing, the producer of the games and
computers actually switched to suppliers in electricity. That is why they would pay less than
other people who do not switch their suppliers and their producer price won’t increase because
they already have sufficient money to pay their daily rent. But when you think of it, this does not
make sense because its better to increase their producer price so that they would have an
increase in salary and in profit, so there must be some other cause. they could maybe be
delayed in the information delivered. That would make more sense because the smart thing to
do is to lower the price in order to gain more demand on their products when they should have
increased the price of it to get enough money to pay off their energy bills. They could go
bankrupt if they were to decrease their price because of insufficient money. To simplify it, here is
a graph:
As you can see from the graph, there is an
income squeeze coming from 2018 to 2019.
The term squeeze is used to describe many
financial and business situations, typically
involving so`me sort of market pressure. In
business, it is a period when borrowing is
difficult or a time when profits decline due to
increasing costs or decreasing revenue. This
means that as the wage growth increases and
the inflation decreases, the income squeeze will
be bigger than before. In other words, the
bigger the difference between the wage growth
and inflation is, the bigger the squeeze. The
decrease in inflation can be from the increase in
interest rate which is what is happening here. There is an increase of interest rate by 0.75%
since last August. This can cause a lack of interest of borrowing money from the bank, and thus
leading to a decrease in consumer spending, and this will cause the prices to decrease in order
to increase the demand for the item. On the other hand, the increase in wage growth can be
caused from the increase in minimum wage. Just like this, the minimum wage is increased due
to the willingness of the company to give more money to the employee in order to increase the
consumer spending, this will also likely increase the inflation due to the increase in price. On
this graph thou, the inflation decreases while the wage growth increases and this causes an
increase income squeeze.
The solution to this income squeeze problem
can involve a variety of strategies, from
increasing compensation to reducing costs of
certain goods and services or helping the
middle-class pay for them. To increase
compensation, you can increase the number
of jobs through policies that stimulate
economic demand, raising the minimum
wage, strengthening the labor movement, and
tax incentives to encourage more
redistribution of corporate profits to workers.
The other solution, which is helping the
middle-class pay for them, is one of the easier
ways to do it, but will require a lot of work
since the government is going to use their money on helping them, which will delay the work on
other stuff like working on the infrastructure of the country.
In conclusion, the squeeze is a bad thing to have in an economy. It is better to make the
wage growth and inflation in the same percentage.