Sal Paradise wrote:... - you are saving up for a deposit but every year the true value of your pot is being reduced by the difference in the inflation rate and the interest rate. With high inflation you cannot save enough as the object you are saving for is costing 10-20% more each year...
Not so.
Back then, the BoE base rate was set high, so as to be higher than inflation, that's why it hit 17% during Thatcher's time.
At the moment, however, base rate is set very low indeed and is deliberately way below inflation, so the point you were making would be true now.
I fondly remember Geoffrey Howe hiking-up VAT and then a year later as that hike disappeared from the year-on-year stats, pointing at it as a decrease in inflation.
Some would have believed him.
You also asked why salaries should have to go up every year.
I think you've probably answered that one yourself ... without an annual rise, once you take inflation into account, the salary is (in real terms) going down, that's why many people think of a rise commensurate with inflation as their right.
Unfortunately, they are wrong, their contract of employment usually states a number of pounds per year and doesn't mention inflation... but you can see why they think as they do.
Many employers nowadays utilise inflation as a way of reducing the salaries of their lower or average performers, awarding catch-up raises (or better) only to the higher-performing staff.
