What Do Finance Experts Say About Inflation?

by William Powell Writer/Educator

With inflation proving to be anything but “transitory,” consumers and businesses alike are looking for ways to brave this tough economic climate.

According to the Bureau of Labor Statistics, the Consumer Price Index in August grew 8.3% over the previous year. This indicates that the same basket of goods one bought last year would cost someone 8.3% more.

Apart from this increase in the general price levels affecting consumers, inflation affects workers and businesses too (albeit differently). Read on to discover what finance experts say about inflation and how it affects those in the job market and businesses alike.

How Inflation Affects Workers

Experts have found that employees experience what one could call “compounded effects” of inflation.

On the one hand, employees (who are also consumers) are paying more for the same basket of goods they bought last year, whereas on the other hand, businesses are seeking to reduce what’s usually their biggest expense on their income statement: salaries.

This increases the likelihood of lay-offs, which can be tough for employees in the current economic climate. Another facet of inflation affecting workers is gas prices. This increases employees’ cost of commuting to work. In contrast, inflation may result in higher minimum wages since it puts pressure on companies to raise wages.

What Workers Can Do

With organizations possibly seeking to make budget cuts by laying off employees, there are a few things workers can do:

Understand Employee Benefit Plans

This means clearly understanding the company’s employment benefit plans. Some businesses have a severance plan apart from a 401(k) and defined benefit pension plans. These plans pay workers in the event of an involuntary termination of their employment. As an employee, this can help you get on your feet while you look for a new job or pay off debt.

However, keep in mind that the IRS taxes severance pay in the year it is received. If you receive severance pay, it may help to seek the services of tax professionals.

Request to Work From Home

With the pandemic thrusting everyone into remote work, many employees and organizations have adapted to this change in the working environment. If you aren’t already working from home (and your work could be completed outside of the office), perhaps you can request to do so to help mitigate the effects of gas prices on your wallet.

As in the case of receiving severance pay, it helps to speak to a tax professional or CPA. They can advise you on whether you can—and if so, how much—claim deductions for your work-from-home office space.

How Workers Can Use This to Their Advantage

As an employee, you can use this period to request a salary or wage increase. Considering that businesses are under pressure to increases wages to attract and keep staff, this may be an opportunity to increase your earnings.

How Inflation Affects Those on the Job Hunt

What kinds of jobs are accessible and what people are willing to work for or accept are both affected by the rate of inflation.

Apart from the tech sector, companies are still hiring workers. If you are looking for work, this suggests you still have options.

How Job Seekers Can Mitigate These Effects

Job seekers that may have been laid off can seek part-time or contract work while looking for work. While it doesn’t replace a full-time job, it can help offer candidates greater flexibility in work hours.

Plus, with inflation possibly increasing minimum wages, a job seeker may find a part-time job paying them more per hour than previously.

How Candidates Take Advantage of This

Job seekers can take advantage of this inflationary period by requesting higher wages or seeking employment that offers better pay.

While looking for a job, take the opportunity to develop your career by seeking the services of a job mentor to help you on your job search. It pays to be prepared for opportunities.

How Inflation Affects Businesses

Inflation drives up the cost of doing business and producing goods and services. This is because it leads to increases in manufacturing and input costs. In addition, inflation puts pressure on employers to pay workers more, further affecting a business’s bottom line.

To deal with this, businesses typically increase the prices of their goods and services to absorb these costs. Another way companies seek to manage these costs is by cutting down on spending.

This may include labor costs, which is usually a company’s biggest expense. Other ways businesses may try to trim their budgets is by spending less on overheads like rent and/or on certain functions like marketing.

What Solutions Can Businesses Implement?

With the general increase in price levels, you want to keep your costs as a business low to stay afloat. In addition, you also want to focus on maintaining and/or generating more revenue. But how does one balance these two?

Well, that’s where using software and/or services that enhance your efforts comes in. While companies are trimming their budgets, yours can focus on evaluating its digital marketing strategy to attract both existing and new customers.

During inflation, customers tend to be more conservative and spend less. This doesn’t mean your business should forget about marketing to them altogether. It just means that your customers’ needs have changed, and you’ll have to adjust your digital marketing strategy to meet these needs.

While other businesses may trim their marketing budgets, yours can stand out from the competition and take advantage of this. You can run PPC campaigns based on your customer personas. By understanding who your current and prospective customers are and creating ads that speak to their needs, you can drive more sales and revenue by creating ads that will convert.

This includes running ads for limited-time promotional discounts to increase the acquisition of new customers.

Final Thoughts on What Finance Experts Say About Inflation

Despite inflation causing fears and uncertainty about the economy, it also presents opportunities for growth and positive change.

Both current workers and job seekers can use this period of inflation to help them stand out as professionals and improve their employment prospects. On the other hand, businesses can take advantage of this inflationary period to stand out from competitors and drive more revenue.

Regardless of which position you find yourself in—business or employee—it helps to be aware of your financial reality and seize opportunities that others may overlook.