Currently, we are seeing many people on social media advocating for higher wages, especially minimum wage. At the same time, there is pushback consisting of people stating that higher wages will make inflation worse.
It occurs to me that under our current capitalist system, it is absolutely necessary to maintain low incomes in the majority of the population in order for the system to function. (And if so, the system itself MUST be reformed). Here's the logic:
The overarching goal of companies is to maximize profit. To do this, they will set prices to the maximum they can before profits start to dip (the “sweet spot” on the price/revenue curve).
Increasing salaries (greater wealth in the population) means that people become willing to spend more on the same items. The “sweet spot” price increases, and companies will increase their prices accordingly, to maximize their revenue. This means that market rates and prices go up; this is inflation.
As a result of inflation, despite higher salaries, the population is not actually becoming wealthier – only the dollar amounts of salaries and prices are meaninglessly increasing.
Having a large proportion of the population living paycheck to paycheck puts downward pressure on the prices of essentials (groceries, gas, clothing, etc) and keeps them from spiraling out of control.
I have an advanced degree but I am not an economist, and would be happy to hear from people who have studied this. I'm sure there's more complexity, but if the above is accurate as a broad outline, then 1) this is a profoundly sick system, and 2) there seems to be an obvious solution.
That is: capping the amount of profit a company can make on a given product. Even if it's 1000%, that would still put the brakes on the wage/price inflation spiral. People earning higher incomes would actually be wealthier in real terms, without impairing business (beyond stopping extreme profiteering/price-gouging).
I don't see this happening anytime soon, of course, but at least it's helpful to recognize the fundamental problem.