Inflation and the Working Class

by Robert Lovely

Many of our readers likely experienced the hardships of the Great Recession of 2008, whether they were adults attempting to make ends meet or children watching their parents struggle to keep it together for them. The housing market came to a screeching halt, the unemployment rate skyrocketed, social services took a grievous hit, and inflation plagued the market. This was, of course, the reality for the working class. While some wealthy capitalists experienced a negligible decrease of the size of their pockets through the loss of investments, others became wealthier than ever before.

Inflation is defined, by Merriam-Webster’s Dictionary, as, “a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services” This definition is accurate enough.[1] But like most bourgeois scholarship, it is sorely neglectful of the details in favor of surface-level analysis. Marx has provided a much more comprehensive definition in Capital:

“If the paper money is in excess, if there is more of it than represents the amount of gold coins of like denomination which could actually be current, it will (apart from the danger of falling into general disrepute) represent only that quantity of gold, which, in accordance with the laws of circulation of commodities, is really required and is alone capable of being represented by paper. If the quantity of paper money issued is, for instance, double what it ought to be, then in actual fact one pound has become the money name of about one-eighth of an ounce of gold instead of about one-quarter of an ounce. The effect is the same as if an alteration had taken place in the function of gold as a standard of prices. The values previously expressed by the price £1 will now be expressed by the price £2”[2]

 As demand for goods and services increases, often due to shortages, manufacturing must increase. As the price of manufacturing increases, prices increase. In an ideal, “utopian” scenario, workers’ wages would increase with these prices, as is often the promise of capitalist politicians. Most often, nominal wages remain stagnant during these times. Even if they increase, real wages remain nearly unchanged, if not decrease.

“Real wages express the price of labour-power in relation to the price of commodities; relative wages, on the other hand, express the share of immediate labour in the value newly created by it, in relation to the share of it which falls to accumulated labour, to capital.” [3]

For a worker, their real wages are expressed in their lives via their actual purchasing power. If the purchasing power of a worker decreases, this naturally increases their cost of living by making the market price of essential goods and services more expensive. This creates the cascading effect of disposable income shrinking progressively, until for many, it simply does not exist.[4] In this way, inflation has not only created more dejected and alienated workers, but more hungry ones as well.

Inflation has been at a constant increase in the United States over the past century. Elderly individuals will often recount that items such as milk used to cost less than a dollar where they can now cost upwards of four. Where gasoline used to also be less than a dollar a gallon, it can reach nearly nine in some states now. And of course, we cannot forget the atrocious cost of housing in the U.S., in even the most rural of areas.

Yet, “a startling fact is that average real wages have grown by only 0.7 percent over the half-century beginning in February 1973.”[5]. However, most born in the latter half of the twentieth century could certainly have told this story without the need for empirical data. You would be hard-pressed to find any working class person under the age of thirty who has actually managed to purchase a home. Affording education, a well-rounded diet, pets, and especially children is an outlandish dream of which the newest additions to the labor force have largely accepted to be an impossibility.

Indeed, inflation does not just force the poor into poverty, but the financially secure into squalor as well. The recession of 2008 saw many “middle class” families see their homes foreclosed in the Housing Crisis. Individuals who had “made it,” so to speak, saw their livelihoods ripped from them in an instant. As for whatever finances they have left, inflation “may wipe out the savings of the middle class and increase the number of poor. In this sense it widens inequality of income and increases poverty.”[6]

Of course, one can have their purchasing power entirely destroyed by being thrust into unemployment. Americans are no strangers to this concept, especially recently. The COVID-19 Crisis took a lot from people the world over, including their means of income.

“Fully 15% of adults report that they personally were laid off or lost their jobs because of the coronavirus outbreak. Of those, one-third say they have returned to the job they had before the outbreak, while 15% are working at a different job. Half say they are currently not employed.”[7]

This, too, is partially caused by inflation. As it becomes more expensive for companies to produce and sell their products, they will begin to make cutbacks. It should be of no surprise that the executives of these companies (who make more money in a week than most working people do in their lifetimes) would do just about anything before they cut their own income to keep their company afloat. Therefore, cutbacks usually come in the form of layoffs, pay cuts, and the reduction of worker hours.[8]

This is not to mention the fact that inflation can put some smaller businesses in jeopardy of failure altogether. Inflation does not just pertain to retail goods; it can also greatly influence the price of wholesale goods. It can run the cost of operation so high that investors and executives will simply cut their losses and abandon their sinking ship, leaving workers to drown in unemployment.[9]

Whilst all this havoc is wrought upon working people, the ruling class, as usual, profit from the suffering. Because workers have no capital to speak of, inflation simply increases their cost of living. However, for one who does possess capital, their capital itself will also see an increased inflation rate, and thereby their net worth will often come to expand during times of inflation. [10] This was abundantly clear during the height of the pandemic. “About $42 trillion in new wealth was created in the first two years of the pandemic. Two-thirds of that has gone to the richest 1% of the world’s people.”[11]

The falling rate of profit, and the nature of capitalism to consistently “eat itself”, also known as the “business cycle” by bourgeois academics, is a built-in feature of capitalism. It is mathematically guaranteed that capitalist economies will go through periods of rapid growth, steady decline, collapse, and recovery. Through all of this, troubles such as unemployment, poverty, administrative chaos, and inflation will disproportionately afflict the working class. The one and only way for this cycle to come to an end is for its root – private property – to be abolished. Until then, the worker will continue to see their lifeblood run dry while the richest among us grow ever deeper pockets.

Works Referenced

Atske, S. (2021, May 28). Economic fallout from covid-19 continues to hit lower-income Americans the hardest. Pew Research Center’s Social & Demographic Trends Project. Retrieved March 24, 2023, from,they%20are%20currently%20not%20employed

Cardoso, E. (1992, March 1). Inflation and poverty. NBER. Retrieved March 23, 2023, from

Fields, S. (2023, January 16). How the world’s richest people became much richer during the pandemic. Marketplace. Retrieved March 24, 2023, from

Hardcastle, E. (n.d.). Inflation: The theories and the facts. Retrieved March 24, 2023, from,excess%2C%20prices%20will%20go%20up

How does inflation impact businesses? Henley Business School. (n.d.). Retrieved March 24, 2023, from

How inflation makes benefits the rich, hurts the poor. Gold Country Media. (n.d.). Retrieved March 24, 2023, from,way%20of%20making%20it%20up.

Marx, K. (n.d.). Wage labour and capital. Chapter 6. Retrieved March 24, 2023, from,to%20accumulated%20labour%2C%20to%20capital

Meglio, F. D. (2022, October 6). How inflation influences layoffs. HR Exchange Network. Retrieved March 24, 2023, from

Merriam-Webster. (n.d.). Inflation definition & meaning. Merriam-Webster. Retrieved March 24, 2023, from

Strain, M. R. (2022, June 27). Have wages stagnated for decades in the US? – AEI. AEI. Retrieved March 24, 2023, from

[1] (Merriam-Webster’s Collegiate Dictionary, 2023)

[2] (Capital Vol. I, page 108 in Alien & Unwin edn.)

[3] (“Relation of Wage Labour to Capital”)

[4] Cardoso, E. (1992, March 1). Inflation and poverty. NBER. Retrieved March 23, 2023, from

[5] (Strain 3)

[6] (Cardoso 2)

[7] (Parker 4)

[8] Meglio, F. D. (2022, October 6). How inflation influences layoffs. HR Exchange Network. Retrieved March 24, 2023, from

[9] How does inflation impact businesses? Henley Business School. (n.d.). Retrieved March 24, 2023, from

[10] How inflation makes benefits the rich, hurts the poor. Gold Country Media. (n.d.). Retrieved March 24, 2023, from,way%20of%20making%20it%20up

[11] (Field 1).

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