If you turned a Federal Reserve meeting into a theatrical production, the marquee might read “Waiting for Inflation.” That’s the economic bogeyman that keeps Fed members awake at night, even though there are zero signs the inflation monster is stirring.
Why all the angst over inflation? In this country it’s mostly painful memories of “The Great Inflation,” in the 1970s, and the severe recession that followed it.
Baby boomer Bob Donohue remembers how inflation affected his father. When his dad retired in 1972, he started collecting a pension of $120 a month.
“My father’s pension check, which was fixed in its amount, covered his rent for two months when he retired,” says Donohue. “Less than seven years later, that same pension check only covered two weeks worth of rent on the same apartment.”
During the 1970s, oil prices more than quadrupled. Mortgage rates hit double digits. The inflation rate shot up from 5.7 percent to 13.5 percent in just four years. Wages and prices spiraled out of control.
The U.S. put an end to runaway inflation in the early '80s by tightening the money supply under Federal Reserve chairman Paul Volcker. But it came at an enormous cost. The recession that followed threw millions of Americans out of work.
CORRECTION: The original version of this article misstated the president under which Federal Reserve Chairman Paul Volker raised interest rates to bring down inflation. It was President Jimmy Carter. The text has been corrected.
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Corporate wellness programs have become a $6 billion industry for one, possibly flawed, reason: they help reduce companies' healthcare costs, while saving their employees money.
To some degree, they have been a success. Growth in premiums has hit its lowest point in the last 16 years. A new survey by the Kaiser Family Foundation shows that 71 percent of employers believe corporate wellness programs are either "very" or "somewhat" effective at reducing spending on providing benefits for their employees, who would be rewarded with these benefits by meeting various incentives.
But companies can also impose a penalty. They can charge an employee more for smoking or being overweight. It's the very reason why, says Professor Nancy Koehn of the Harvard Business School, these programs don't work.
"What's really happening in many instances is that costs are getting shifted to employees, whether it's because they don't meet certain goals or they don't conform in certain ways," she says. "Healthcare costs are going down for companies, but not so much for individuals and families."
And they're not having any lasting effects on their health, either, she adds.
"All these incentives, all these hurdles, greatly increase the cost of testing employees. So these things are more costly than you might think."
Listen to the full conversation in the audio player above.