How to control inflation?

A cohesive fiscal course of action usually helps in controlling inflation. This can be done by keeping control of the increase in public demand for goods and services, thereby decreasing the actual circulation of money. A rise in interest rates also brings a decrease for the demands of goods and services, because high-interest rates dissuade borrowing, and encourage saving because of a rise in the current operating costs.  This also reduces the amount of money in circulation, thereby restricting spending. When interest rate rise, there is also a decline in investing in commercial ventures, because then induces people not to invest in projects that are currently unprofitable.

This leads to a decline in the communal demand for goods and services. Another important factor is the decrease in the expenditures of mortgage rates, which has a direct impact on reducing the spendable income of house owners, thereby reducing buying power. The increase in mortgage rates also reduces the demand in housing schemes and the buying of real estate. These measures have generally shown a reduction in inflation over a period of time. A minimal inflexible take-home pay package is a dilemma to employees when wages drop. In lieu of this, employers usually try to compensate with other incentives and real benefits which are not as inflexible as real wages.

Benefits provided by employers are more flexible than wages, because of this as a buffer against declines in ostensible wages when wages are declining due to many uncontrollable factors, which drops the income of the organization. Labor disputes usually are related to benefits when inflation rates are low. To compensate for not increasing the take-home pay of workers, companies are offering may alternate benefits such as transportation where the company pays a part of the cost (subsidy) caring for pre-school children, setting up stores or linking with stores that give the company employees discounts, free food, helping out in the cost of tuition for the children of employees, company funded recreational activities such as picnics etc.

The company is ready to provide most things or literally everything in lieu of rigid wage increases.  These costs can be absorbed by the company. What is not absorbable is high wages for the workers. Under labor laws, employees of any organization have the legal right to chose bargaining agents whom they feel would look after their collective rights in the best possible manner. This also allows private sector workers to resort to strikes. This right might be availed of by Federal Government, but the line is drawn at those who provide essential services such as policemen, firefighters etc. Labor unions are usually voted in, and they become the collective voice of the workers