Dear Editor: Rising prices and lowered incomes are inevitable; here is how to adjust

“[…] The spread of Covid-19 has disrupted households and businesses in the form of reduced economic activity which has affected wages and revenue. This disruption leads to a lowered standard of living/poverty, or price increases to prevent business losses which then results in inflation…”

The following Letter to the Editor on combating rising prices and lowered incomes resulting from Covid-19 disruptions was submitted to Wired868 by Antonio Decklan Ross:

Image: A satirical take on life during the Covid-19 pandemic.

The basic fact is that, in a capitalist system, the goal of an individual/business is to increase wages/revenue in order to offset cost of living/expenses, so as to improve standard of living/save/make a profit.

Every person/household/business carries costs (fixed and variable). Fixed cost is constant and therefore does not change regardless of what you do. Variable cost depends on the activities carried out within a specific period of time in a home or business.

Wages/revenue are used to offset costs. Depending on your form of employment or business, wages/revenue are either fixed or variable.

Efficiency in a household or business is a situation where little to nothing is wasted. Inefficiency is a cost. Depending on the nature of a business, idle equipment is considered ‘waste’ because it carries a fixed cost but does not generate revenue.

The spread of Covid-19 has disrupted households and businesses in the form of reduced economic activity, which has affected wages and revenue. This disruption leads to a lowered standard of living/poverty, or price increases to prevent business losses, which then result in inflation.

Image: A satirical take on the predicted economic backlash to the Covid-19 pandemic.

This logic can be applied in the case of the taxi/taxi-driver as well as a bakery.

A taxi-driver with a fixed cost at home and an increasing cost of living due to inflation can only offset this by increasing earnings through a hike in the taxi fare.

A taxi carries fixed and variable costs. Its operating cost will increase due to the raised cost of parts and repair labour, which again can only be offset by increasing taxi fares. And consider too the cost of inefficiency due to reduced capacity caused by Covid-19 regulations.

(I deliberately separated taxi-driver from taxi because those are two different ‘business entities’.)

In the bakery, there is the disruption of the labour force due to Covid-19 illness, reduced sales by small/medium/large vendors due to the lockdowns, which lead to reduced revenue and idle equipment while still carrying fixed costs such as bank loans. And there is the increased cost of raw materials used to make finished products for sale as well as increased distribution cost.

Image: A customer reacts to high prices.
(Courtesy FinanceTwitter)

What can YOU do to battle loss of wages/earnings or inflation?

  • Do a WRITTEN budget
  • Be creative and industrious
  • Utilise your time wisely by converting it into money
  • Swallow your pride and engage in economic activity that you may have previously considered to be beneath you
  • Reduce your cost of living and that of your household.
  • Seek out and utilise more government subsidised services, such as buses, public healthcare, social services, etc
  • Ask for HELP

Please note, I am not making a case for price increases but merely trying to explain—from a layman’s perspective—how you can overcome them.

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