The Case Against Raising Minimum Wage: Why Inflation Is the Real Problem

Raising minimum wage only temporarily raises the income of minimum wage workers. There's a reason that say, engineers make X amount of times the amount of money that minimum wage workers make. It's because that's what the market has determined their labor is worth relative to each other, using our pricing structure to describe the labor values in absolute terms. The same goes for any job relative to another.


No amount of raising the minimum wage is EVER going to change those real relative labor values. What it does do, however, is distort the pricing structure until it (somewhat) recovers from government abuse. Eventually the wages of higher earners will go up and minimum wage earners will be making the same amount of money compared to the higher income groups as they were before.


Anybody who supports raising minimum wage is just jerking off because they don't want to address the real problem, which is inflation. Since the minimum wage increase in 2009, prices have gone up 9%, which means that the poor have seen a decrease in their income of 9%. For people who can barely feed themselves, that is SIGNIFICANT.


The typical solution presented is to lock minimum wage to inflation. That is a non-solution, because it will not change the fact that inflation will devalue the poor's wages until minimum wage goes up again. If one really cares about the poor, they would demand that the Federal Reserve be required to target 0% inflation. Then we won't have to worry about rising prices harming the poor.

 

Well paid Senate keepin' the working class down...

Senate blocks federal minimum wage bill
April 30, 2014 ~ WASHINGTON – A bill to increase the federal minimum wage stalled Wednesday in the Senate, in the latest setback for Democrats pushing a set of election-year economic bills.

 

So raise it again later. Problem solved.

 

Raise min wage and fight inflation at the same time??

 

Things like raising the min wage, and the unions demanding ever increasing wages only serves to make money cheaper and cheaper. Nothing actually changes.

When my wife and I got married 47 years ago, a weeks worth of groceries cost around $20. Now they cost $120!!!! Yet our standard of living really hasnt changed at all. The dollar has just become more worthless!!!!

 

Short term solutions does not provide businesses with the long term solutions they need to plan.

 

flyboy

That is the problem of todays liberals. They are so short sighted, they only think of themselves today. They seem incapable of seeing the long term result of their actions. But then when I look at what I wrote, maybe I should not use the word think and liberal in the same thot.

 

You come up with the solution then. I can agree that money creation is probably done irresponsibly.

 

That is a non-solution, because it will not change the fact that inflation will devalue the poor's wages until minimum wage goes up again.

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There is no net gain in the long run from raising minimum wage, as I pointed out in the OP.

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The solution? Get the Fed to target 0% inflation. Abolish minimum wage and welfare. Implement Milton Friedman's Negative Income Tax system for the poor.

 

You don't think that's a bit of a longshot? You'd probably have to have guaranteed/required work to even implement it.

 

The solution is simple and is already carried out in a lot of places around the world. You link the minimum wage to the national average wage and take it out of the politicians grubby hands and make it an annualised process.

By the way, zero inflation is considered a very bad thing - it is indicative of an economy in severe problems

 

even simpler solution, - increase min wage and lower the salaries of the higher ups.....

 

Raising the minimum wage would really just lead to higher prices on goods and services on top of the inflation that already exists and would accomplish nothing. The only real fix would be to go back to hard money backed with something other than an IOU by the FED! The fiat dollar's value is falling more all the time and until THAT is fixed we as a country will just continue to be a dog chasing it's own tail.

 

Raising the min wage will probably lead to more demand for products and services, since those working will have more disposable income. the 1-1 mill forced out of the work force will likely be the least qualified, and will need to seek volunteer solutions for gaining work experience. Since experience will likely be the key factor, this will mean that the young (teenagers) will be the most likely ousted. In the mean time however, jobs in higher skilled fields will likely be created in response to the increase in demand.
Wages will improve in response to this demand/ people being able to point out that they can get 10.10 at the local mcd's why should they do (insert more difficult part job).
Inflation will go up, and assuming wages factor inflation those with debt will be relieved and those with savings will be at a loss.

All in all, i think that raising minimum wage to 10.10 and then straping it to inflation will help minimize stagnation in savings and promote investment. Thus it is a good idea for growing an economy.

 

Yeah, but the GOP wants to abolish the minimum wage - this is their comeuppins' !

 

Not only the GOP. I want to abolish the minimum wage. Anyone who has studied economic theory knows that the minimum wage is basically legalized slave labor.
If you "raise" the minimum wage BTW, it'll actually affect low-skilled workers. It's quite simple, it goes like this:

CEO: Hmm, I can hire the talentless chump for $10 bucks an hour, or I can hire the professional worker for $15 an hour. I know, I'll go with the professional worker!

Of course, the smaller the gap of wages, the wider the hiring gap is going to be. You might as well abolish the minimum wage in exchange for a Fixed Wage.(Or a Standard living one). It'll give cost certainty to business owners while strengthening the middle class.

 

The GOP has some good reasons for opposing it. On the face of it tinkering around with market forces is inherently undesirable.Since people with savings will be hurt by the increase in inflation it promotes investment over savings, which is unpalatable for some, especially those with savings. And it will make truly small businesses (say your mom & pop diner, or the local gas station) to stay profitable. All of these things can't be ignored.

Still since (sadly) truly small businesses that don't require advanced skills are dying out anyway, most people can barely save a nickel, and sometime competent government influence can help a market grow I feel that raising the min wage can be a good idea that will make the economy stronger.

 

Thank Obama for planting an ocean of money trees since 08. He's such a wonderful man, really he is.

 

I think OP shows a fundamental misunderstanding of what inflation is. Inflation is the result of growth in our economy. Growth in the economy always results in wage increases. So growth always results in inflation. We cannot have growth without inflation. It's not possible.

All minimum wage does is put a little force into where the growth is going. Growth does not naturally hit the lowest skilled positions. In fact it doesn't naturally hit any position that's not at the top of the income brackets or the top of the company in question. Minimum wage balances out where that growth appears. It doesn't make inflation happen faster because we're not adding money to the economy. We're simply forcing the top %1 to give some of the profits to the lowest of their employees. And the economy is better for it.

 

Just another vote buying scheme.

 

when ever the economy gets so lopsided that the rich have way too big a piece of the pie.... and the rst have only a sliver.... inflation is on the horizon to fix that... cause and effect....


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In a dynamic economy incentives matter. When you force small business to pay higher wages they either charge more for their goods to offset their cost of doing business. Which could result in their businesses losing business. Or force them to do the same with fewer workers. Resulting in higher unemployment. Simply raising wages does not mean all companies can afford it. Also another deleterious effect is companies would have to raise the wages of their more skilled employees and or managers. There's no free lunch!

 

Dr. Righteous:::Raising minimum wage only temporarily raises the income of minimum wage workers.

Protowisdom:::Rising wages will only cause significant inflation if wages rise faster that production capacity. If wages rise at the rate of production capacity or less, then production of goods and services will be increased as much as the new demand from the rising wages increases. When supply and demand are in balance, there is little inflation. In addition, when sales increase due to wages rising at an ideal rate, economies of scale make it cheaper to produce each item or service. These economies of scale also counteract inflation.

Dr. Righteous::: There's a reason that say, engineers make X amount of times the amount of money that minimum wage workers make. It's because that's what the market has determined their labor is worth relative to each other, using our pricing structure to describe the labor values in absolute terms. The same goes for any job relative to another.

Protowisdom:::The pay of engineers doesn't really reflect what their labor is worth. It only reflects what businesses are willing to pay them. What businesses are willing to pay them is not set by a free market because those giant corporations which hire large numbers of engineers tacitly collude with one another to decide what they will pay. Of course, the value of the work of engineers in the out years doesn't get factored in at all. The new inventions produced by engineers often increase the size of the economy for decades and centuries to come. Yet, engineers aren't paid for the future economic growth they bring about. We owe everything we have to the work of past inventors. Without them, we would still be living at a paleolithic level with only some clubs and stones. Those inventors of the past for the most part were never paid for what we have now.

Dr. Righteous:::No amount of raising the minimum wage is EVER going to change those real relative labor values. What it does do, however, is distort the pricing structure until it (somewhat) recovers from government abuse. Eventually the wages of higher earners will go up and minimum wage earners will be making the same amount of money compared to the higher income groups as they were before.

Protowisdom:::They may well not be paid more compared with the highest income workers, but those are not a free market either and are distorted. No executive does enough work to be worth ten to a hundred million dollars per year. Before Reagan, when the minimum wage was periodically raised, the economy did grow. After Reagan, with fewer minimum wage increases, the real dollar economy didn't grow as fast as before. If anything, considering history, raising the minimum wage leads to economic growth.


Dr. Righteous:::Anybody who supports raising minimum wage is just jerking off because they don't want to address the real problem, which is inflation.

Protowisdom:::Supporting an increase in the minimum wage doesn't feel like jerking off. I already addressed the inflation question above. If the minimum wage, with other wages, increases faster than production capacity is increased, that produces inflation, and more inflation the more the wage increases rise above production capacity increases. Conversely, if wages rise more slowly than production capacity, the economy will grow more slowly than it could. What will happen is that sales won't rise as fast as production could be increased, so businesses will merely be left with excess unused capacity.

Dr. Righteous:::Since the minimum wage increase in 2009, prices have gone up 9%, which means that the poor have seen a decrease in their income of 9%. For people who can barely feed themselves, that is SIGNIFICANT.

Protowisdom:::There are other causes of inflation which are more important. For example, there has been a growing though not yet serious reduction in food production compared with the world's population growth. That causes food prices to increase regardless of what is happening with the minimum wage. Then, executive salaries have been rising very fast. There are now more than 500 billionaires in the United States, and the money for that came out of the economy. So the large wage increases of the wealthy have contributed to inflation, but not the tiny minimum wage increases.


Dr. Righteous:::The typical solution presented is to lock minimum wage to inflation. That is a non-solution, because it will not change the fact that inflation will devalue the poor's wages until minimum wage goes up again. If one really cares about the poor, they would demand that the Federal Reserve be required to target 0% inflation. Then we won't have to worry about rising prices harming the poor.

Protowisdom::: The best way to help the poor would be to give them increased income via increasing economic growth and protective laws. We have a lot of wiggle room there. Currently, the per capita aggregate income in the United States is about $42,000 dollars per year, or $168,000 per year for a family of four. This is what everyone would receive if all the aggregate income were divided equally. Thus, if we increased the per capita aggregate income by 5% per year, we could raise the income of everyone, with the poor receiving a bit more of the added income. So we could give a lot of help to the poor, while the income of everyone else would still increase, a tad more slowly but increase.

 

0% inflation would be bad--very bad--for the US.

 

Yup. This is very true. It means there is no incoming money into our economy. No growth. The goal shouldn't be 0% inflation. It should be about 2% inflation combined with a well balanced growth that is felt in all income brackets. This requires some smart progressive taxation to make sure growth from the top finds its way to the bottom.