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re: Minimum Wage drives Inflation
Posted on 2/4/21 at 10:13 pm to Bard
Posted on 2/4/21 at 10:13 pm to Bard
Here's a link thst explains both sides. Basic takeaway increasing to pace inflation will barely affect it. Raising too high will cause problems.
investopedia
investopedia
0
Posted on 2/4/21 at 10:29 pm to Bard
Microeconomics is different than macroeconomics and the two do not converge. Minimum wage is a microeconomic factor setting the floor for labor costs. Increasing the costs to produce does not mean an increase in demand of the widgets.
Inflation happens when too much money chases too few goods, such as when aggregate demand outpaces aggregate supply or when loose monetary policy occurs with a shortage of produced goods.
How many people actually make minimum wage?
Inflation happens when too much money chases too few goods, such as when aggregate demand outpaces aggregate supply or when loose monetary policy occurs with a shortage of produced goods.
How many people actually make minimum wage?
Posted on 2/5/21 at 8:15 am to The Goon
quote:
Inflation happens when too much money chases too few goods,
In a vacuum, sure. We're not in a vacuum though, we're in a fiat currency where one primary driver (literally printing money) is going full bore while another (deficit spending) is doing the same. Even though most low-end wage earners are making above minimum wage, they aren't making $15/hr. The average US small business owner has 10 employees and runs a profit margin of around 7% and is already paying them ~$10/hr. If they are working a full 40 hours a week, that's an extra $2,000 per week or $102k per year (not including insurance, etc).
That extra labor cost can break a small business. They will defray that cost by cutting hours, letting go of employees and raising prices (inflation).
Your larger retailers, those like WalMart or Apple whose quarterly net profits are in the billions can easily absorb such an extra cost, but the mom and pops are the ones who will take it on the chin. That's both micro and macro.
Posted on 2/5/21 at 8:26 am to Walnut
quote:
Ultimately that's why I'm not in love with the idea of $15/hr minimum wage
Even if it were perfect, you get price shock by more than doubling it overnight. Nothing good can come from big jumps like that
The market has largely already moved away from minimum wage jobs. This shows that the markets are efficient and do work.
Very few people in the US make minimum wage, and many are kids. Stores will just hire less people.
It provides downward economic pressure against employment. Growing businesses that need extra help, on average, will likely delay hiring a while, or simply not hire at all if they can get more productivity out of their existing workforce.
HEB is one of Texas' best grocery stores, and as a favor to the community, they hire tons of high school aged kids to sack groceries and check people out. It's mutually beneficial - HEB has a lower cost of wages, and kids who are mostly still supported by their parents get to make some spending money and learn about working a real job.
So HEB would - most likely - cut back on new hires, and you'd have less checkers and sackers, and those kids would then need more spending money from their parents, or would go without altogether.
Minimum wage just shifts money around.
The rules of economics are pretty rigid, kind of like the laws of physics. At a higher price, there is less demand for labor.
This post was edited on 2/5/21 at 8:28 am
Posted on 2/5/21 at 8:28 am to Walnut
quote:
Minimum wage is a balance between providing more buying power for everyone who works, and keeping inflation at a healthy level
It's pretty inarguable that they're two sides of the same coin
It's completely arguable because that's completely wrong.
Labor can be measured as a good or service just as anything else. Minimum Wage laws are an artificial price floor for that good or service. When that floor rises too high we end up with a surplus of the good or service, in this particular case the more popular name for that surplus is "unemployment".
On the business side of the issue we see the rising cost of labor cause other alternatives to become more attractive as the labor price point reaches certain points. Today we have kiosks at McDonalds and Taco Bell and Amazon has automated warehouses because the price floor for labor reached a high enough point that made pursuing that technology cost effective. Another aspect we see in this (as someone else mentioned earlier in the thread) has been the offshoring of jobs.
For a long time here I've pushed for a tax framework that would incentivize tax reductions based on payroll framework instead of mandating minimum wage and using taxation as a penalizing factor. As long as your least compensated employee makes within n% of your highest compensated employee your company gets x% off of *insert-a-tax-here* (it would have to be enough to at least be tempting to the business community).
Why try something like that instead of Minimum Wage laws? Because businesses will always seek to find the most profitable ways of doing things so instead of fighting against that tendency, use it.
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