By Walter E. Block
Retirees’ Re-Entering the Labor Market Isn’t ‘Good for the Economy’; There’s more to wealth than work
Does inflation increase wealth? That is the contention of some economists and business journalists who should know better. Inflation has a silver lining for economic welfare, they claim, or price increases are good for the economy as a whole.
The argument in a nutshell is that inflation induces newly impoverished retirees back into the labor force. Their work increases gross domestic product, and we will all benefit from the increased goods and services it creates. So too for those who put off retirement, unable to afford it because of inflation.
It is true the inflation makes people on fixed incomes poorer, and that some people respond by going back to work. But does that really help the economy?
No. It boosts the GDP and its growth prospects, but it hardly amounts to an overall economic benefit. Economics 101 teaches that there is such a thing as a labor-leisure dichotomy. Why don’t people seek to work all the time? Because they value the leisure they would thereby forgo more highly than the additional money they could earn. Most people are reasonably happy with 40-hour weeks and a vacation of one month a year or so. But GDP would be higher if they labored 80 hours on a week and took no holiday at all. The prospects for economic growth would also increase.
Would the average person be happier, and would it help the economy, if people were compelled to work that much more merely to boost GDP? Of course not. Most people would be miserable with 80-hour workweeks, and economic conditions would be worse, not better.
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