ELI5: Why do prices go up but salaries don’t?

Prices go up while salaries often stay the same because things become more expensive to make and buy, but companies don't always want to pay workers more.

Imagine you're selling lemonade. Prices are what you charge for each cup. Your salary is like your allowance you get each week.

• If the price of lemons (what you need to make lemonade) goes up, it costs you more to make each cup. You might need to charge more for your lemonade to make the same amount of money. This is like prices going up in stores.

• Sometimes, your parents (the company) might say they can't afford to give you more allowance because they have other things to pay for, like the water bill (other business costs).
• Other times, if lots of kids (other people) want to sell lemonade, your parents know you’ll probably still sell lemonade even without a raise, so they don’t have to pay you more. This is like lots of people wanting the same job; the company doesn't have to offer higher salaries.

Companies often try to keep salaries low to make more money themselves, even when prices are going up. This can make it hard for people to buy the things they need.