So I was listening to mathematician and economist Eric Weinstein, and he told an anecdote about salary in a hyper-inflationary economy. In the story, the employee and employer argue over the "fair" compensation as it relates to inflation(then further tied to Gauge theory but that is not relevant), where the employee states salary should be derived from the real spending power of the currency.

Would the argument of salary derivative wrt purchasing power(or relative value) hold any water if the notion of constant salary is not explicitly stated? Or is it just implicitly assumed? Would this question differ for a contractor?


In practice this is rarely done in the US. There have been cases of employment contracts with automatic increases tied to the CPI (Consumer Price Index) or some other measure of inflation -- I believe at one time a number of union contracts specified this. Employer and employee could certainly agree on any such formula.

But in the absence of any explicit provision for such a link, and an agreed formula for the resulting salary, I think a stated salary would be interpreted as a fixed sum, not subject to change until an explicit change is made. Fixed wages are the almost invariable custom, and in the absence of any explicit provision for an automatic inflationary change, I think a court would assume a fixed amount, if it came to a court case.

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