Inflation, Labor Costs and the Environment

When people think the purchasing power of their money is going to drop they tend to spend on goods or services. If goods and services get pricer, they tend to buy less goods and services. Which of these two forces is stronger? I have no idea.

I think some of this depends on the current economic situation of people and their current possesions. Those who are more well off and already in posession of most of their wants or needs tend to spend their money more on services (or RE). Perhaps perceiving a decrease in their purchasing power will drive a short term desire to upgrade all their material goods or spur a short lived purchasing spree of goods that will give way to spending on services. Those in a poorer or less stellar financial situation might also go on a little spree of purchasing essentials, if they catch on that their purchasing power will be decreasing, but for the most part probably won't be able or willing to go on a shopping spree of material goods. They'll be cocerned with saving for fear that costs of essentials such as housing will go up. Ultimatley, regardless of where people stand financially, they can only have so much stuff and if stuff gets pricier, there's less reason to buy stuff.

When it comes to purchasing goods, there will probably be a fixed increase on goods of all qualities as materials and labor costs increase. If we cut off the supply of cheap labor the cost of all good costs will go up even further. If the cost of goods goes up this will probably reduce the desire to buy more disposable goods and goods that are not necessary. This will drive those with less purchasing power to restrict the purchase of goods. People will hold onto their t-shirts a bit longer and try to sew a button on instead of throwing the whole thing away. This leads to less consumption and processing of raw materials. Less material in the landfill, less water and acreage used in cotton prodcution, and lower fuel, oil and packing material costs.

As purchasing power increases for those benefitting from increased labor wages the demand for meats will increase. If the government works to limit increases in acreage for raising livestock, the price of meats will increase thereby increasing prices due to limited supply and high demand. As prices go up, demand for livestock will increase and shift people towards meatless alternatives. Increased environmental damage from raising livestock will be mitigated. To mitigate the poor being priced out from enjoying meat, the government should provide vouchers directly to the needy instead of subsidizing the industry directly. These types of actions from the government will help spur development of meat and fish alternatives.