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Does raising minimum wage cause inflation?
We raise minimum wage in order for people to afford to live, but does raising minimum wage actually encourage inflation? I have yet to come up with a definitive answer to this question.
When cost of living increases, people need to make more in order to adjust, but at the same time, when the wages goes up, the cost of living tends to go up with it. Do landlords and the like raise prices because the consumer can afford to pay them again.
Basically, we seem to increase minimum wages in states, only to have the cost of living go up to a point where nothing has changed.
Instead of making $6.10 an hour or $200 a week and paying $400 for a shitty apartment, people used to make $0.60 an hour or $24 a week and paid $16 in rent for the same shitty apartment.
Those numbers aren't researched, so don't try hard to disprove them. I'm inebriated and simply trying to start a conversation. If you have actual historical costs, please feel free to post them. The numbers sound close to right though, and that's enough for me at this point.
The point is, does raising minimum wage actually accomplish anything other than causing even more inflation?
If we stopped raising the minimum wage, would inflation stop increasing at the rate it currently is. Obviously there are other factors that cause inflation, like our national debt and the printing of money we can't back, but would things work out if we stopped raising minimum wage or would there simply be rampant homelessness?
Also, in the 80's and before that, middle class families (for the most part) could afford to send kids to college, provide them housing, and give them allowances. Now most can't, we are required to work while being full-time students and the average 4 year degree is taking 5-6 years to complete.
For example, after hurricane Katrina, when everyone around here got there $2,000 to $4,000 from FEMA, the price of the apartment we were living in rose from $550 a month to $770 in just a few months.
That was simply a short-term influx of money, so isn't it logical the same happens when minimum wage increases?
Is it logical you could reverse inflation if you lowered minimum wage?
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Does raising minimum wage cause inflation?
theoretically and empirically the answer is yes for the most part....while the money supply itself still plays a large role in inflation as well as what people do with the extra money when they get it...there is some evidence that saving it as opposed to spending it could hedge inflation...i wish i still had my old labor econ book with the graphs to prove it, perhaps ill go look it up tomorrow
and while i dont know if you could reverse it exactly, you could certainly put downward pressure on inflation by lowering the minimum wage
thats the thing, i know you are a fan of the free markets and the minimum wage if actually a market inefficiency because theoretically there are people that would be willing to work for a lower wage but the law doesnt permit it, and therefore the firm loses out
the thing ive noticed throughout my study of economics is that REAL growth (real as in actual growth without inflation) is very hard to define and determine what the many factors are
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Does raising minimum wage cause inflation?
raising the minimum wage does not cause inflation, at least not in the sense that i use the word. raising the minimum can raise prices though. if a company has 20 workers working at $5/hour and minimum wage is brought up to $5.50, some changes will have to be made. this is where the good nature of the minimum wage law goes wrong. how will the company compensate for this price control on labor? one option is to raise the price of their product and keep all their workers. another is to fire 2 workers, keep the price of their product at the same level, and lower production. in other words, minimum wage laws kill production.
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
raising the minimum wage does not cause inflation, at least not in the sense that i use the word. raising the minimum can raise prices though. if a company has 20 workers working at $5/hour and minimum wage is brought up to $5.50, some changes will have to be made. this is where the good nature of the minimum wage law goes wrong. how will the company compensate for this price control on labor? one option is to raise the price of their product and keep all their workers. another is to fire 2 workers, keep the price of their product at the same level, and lower production. in other words, minimum wage laws kill production.
in the way that i understand it, thats how they measure inflation...by looking at price levels
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Does raising minimum wage cause inflation?
Its real simple... employers have a certain profit margin they have to maintain to keep their doors open and have a little left to re-invest in their business/company to replace worn out and outdated equipment, etc.
Employers are in business to make a profit.
When the minimum wage is raised, the employer has 3 choices.... charge more for their products/services, or lay off people, or close their doors.
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Does raising minimum wage cause inflation?
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Originally Posted by Stemis516
in the way that i understand it, thats how they measure inflation...by looking at price levels
higher prices are the result of inflation. inflation is an increase in the money supply. this is the view from the austrian school of economics.
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Originally Posted by Mississippi Steve
Its real simple... employers have a certain profit margin they have to maintain to keep their doors open and have a little left to re-invest in their business/company to replace worn out and outdated equipment, etc.
Employers are in business to make a profit.
When the minimum wage is raised, the employer has 3 choices.... charge more for their products/services, or lay off people, or close their doors.
exactly. minimum wage is one of those things that sound nice to everyone, but really hurts everyone.
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
exactly. minimum wage is one of those things that sound nice to everyone, but really hurts everyone.
Ok, so if we agree minimum wage actually hurts in the long run, unions are a negative as well?
Workers need protection, but Unions force employers to give raises, same concept of minimum wage hikes. In particular in small towns with plants that are unionized.
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Does raising minimum wage cause inflation?
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Originally Posted by JaggedEdge
Ok, so if we agree minimum wage actually hurts in the long run, unions are a negative as well?
Workers need protection, but Unions force employers to give raises, same concept of minimum wage hikes. In particular in small towns with plants that are unionized.
Exactly.
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Does raising minimum wage cause inflation?
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Originally Posted by JaggedEdge
Ok, so if we agree minimum wage actually hurts in the long run, unions are a negative as well?
Workers need protection, but Unions force employers to give raises, same concept of minimum wage hikes. In particular in small towns with plants that are unionized.
no, unions are fine. unions can try and get raises, but if they demand wages too high, other workers who are willing to work for less will come in and take their place.
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Does raising minimum wage cause inflation?
There are a couple terms being synthesized loosely. While it is true that in the classical sense, inflation is an increase in the money supply, the end result does not always equate to increased prices. Price is a function of both supply and demand, therefore the slogan "to many dollars chasing too few goods" only implies if the demand for dollars decreases relative to the demand for that specific good.
Could more dollars in the system cause this to happen? Sure, but i highly doubt the lowest income earners increase in volume would be enough. Reason be, a firm's revenue might increase as the result of more disposable income from a demographic that has a steady % of their budget allowing the purchase of the specific firms good or service.
With this in mind, the real question is whether an increase in minimum wage reduces the instances of employment (jobs shifting overseas) as opposed to an increase in m2. If the decreased cost of production equals lower prices, equal to the lost revenues (short run) due to lost employment, than it is a positive outcome (long run).
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
no, unions are fine. unions can try and get raises, but if they demand wages too high, other workers who are willing to work for less will come in and take their place.
I have to disagree.
Unions cause companies to move out the country. I live around towns with plants, and know several people who work at oil plants. The company in the town by me may be closing down because of the union. I fail to see how that is in the best interest of the company or it's employee's. Instead of continuing to deal with the union they are simply planning to close down the plant.
Also, when they strike the companies don't necessarily let new workers in. The plant by me simply uses a skeleton crew of upper-management and cuts back production drastically, which ultimately causes higher gas prices.
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Does raising minimum wage cause inflation?
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Originally Posted by JaggedEdge
I have to disagree.
Unions cause companies to move out the country. I live around towns with plants, and know several people who work at oil plants. The company in the town by me may be closing down because of the union. I fail to see how that is in the best interest of the company or it's employee's. Instead of continuing to deal with the union they are simply planning to close down the plant.
Also, when they strike the companies don't necessarily let new workers in. The plant by me simply uses a skeleton crew of upper-management and cuts back production drastically, which ultimately causes higher gas prices.
it is better for the company to close down the plant and find people who will take the lower wages in the long run. a real problem today is the standard of living in the united states needs to drastically fall. nobody wants to accept it, but it has to happen, china will stop sending us money eventually. if the company can find cheaper work elsewhere, that is beneficial to both the company and the economy. the unions can try to get higher wages, but isn't going to happen if they are already overpaid. if the company continued to overpay its workers, it would end up like GM and Chrysler. then again, I guess that isn't a bad thing anymore.
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
it is better for the company to close down the plant and find people who will take the lower wages in the long run. a real problem today is the standard of living in the united states needs to drastically fall. nobody wants to accept it, but it has to happen, china will stop sending us money eventually. if the company can find cheaper work elsewhere, that is beneficial to both the company and the economy. the unions can try to get higher wages, but isn't going to happen if they are already overpaid. if the company continued to overpay its workers, it would end up like GM and Chrysler. then again, I guess that isn't a bad thing anymore.
They make around $70,000 annually, for working full-time. They make around 125,000-150,000 if they work a lot of overtime. I don't think they really need much more. Those are fair wages. Also, if they simply moved somewhere else in the states I wouldn't argue much, but they are going overseas. Granted, I feel the government is to blame for corporations moving to other nations, but it doesn't change the fact we should try not to run them away. These small towns need these plants.
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Does raising minimum wage cause inflation?
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Originally Posted by JaggedEdge
They make around $70,000 annually, for working full-time. They make around 125,000-150,000 if they work a lot of overtime. I don't think they really need much more. Those are fair wages. Also, if they simply moved somewhere else in the states I wouldn't argue much, but they are going overseas. Granted, I feel the government is to blame for corporations moving to other nations, but it doesn't change the fact we should try not to run them away. These small towns need these plants.
People will realize they have to take a pay cut once all the jobs start going overseas. I don't have a problem with them taking the job out of the country at all. Especially when their workers are that overpaid. We can't prop up companies who pay their workers too much, that will just lead to other companies around the world having a huge advantage and eventually they would beat out our companies who have to pay more for labor.
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
People will realize they have to take a pay cut once all the jobs start going overseas. I don't have a problem with them taking the job out of the country at all. Especially when their workers are that overpaid. We can't prop up companies who pay their workers too much, that will just lead to other companies around the world having a huge advantage and eventually they would beat out our companies who have to pay more for labor.
Doesn't you argument here disagree with unions though? We are already experiencing these problems. Cap and trade will do exactly what you are talking about. We shouldn't try and run companies out of the United States, by doing so, we are shipping job's overseas and harming our own economy. Cheap products do us no good if their aren't enough employed people to purchase them.
I'm not suggesting we should prop them up, I'm simply arguing we shouldn't do things to cripple them to the point where the say, "Fuck this we're moving."
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Does raising minimum wage cause inflation?
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Originally Posted by JaggedEdge
Doesn't you argument here disagree with unions though? We are already experiencing these problems. Cap and trade will do exactly what you are talking about. We shouldn't try and run companies out of the United States, by doing so, we are shipping job's overseas and harming our own economy. Cheap products do us no good if their aren't enough employed people to purchase them.
I'm not suggesting we should prop them up, I'm simply arguing we shouldn't do things to cripple them to the point where the say, "Fuck this we're moving."
Personally, I am against unions, but we can't stop people from joining together to demand higher wages when the time is necessary. If people want to be arrogant asses and demand higher wages, they will have to pay the price of not having a job.
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
Personally, I am against unions, but we can't stop people from joining together to demand higher wages when the time is necessary. If people want to be arrogant asses and demand higher wages, they will have to pay the price of not having a job.
I can't disagree with any of that.
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Does raising minimum wage cause inflation?
Quote:
Originally Posted by JaggedEdge
Doesn't you argument here disagree with unions though? We are already experiencing these problems. Cap and trade will do exactly what you are talking about. We shouldn't try and run companies out of the United States, by doing so, we are shipping job's overseas and harming our own economy. Cheap products do us no good if their aren't enough employed people to purchase them.
Mass production needs skilled technicians to repair and replace the machines that truly produce. The future is automation, with very few people involved in the production process, with many people involved in the R&D, marketing, transportation, etc....
The phase from 2nd to 3rd phase economies (mass production -> mass information/mass customization) is currently under way.
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Does raising minimum wage cause inflation?
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Originally Posted by GoldenBoy812
Mass production needs skilled technicians to repair and replace the machines that truly produce. The future is automation, with very few people involved in the production process, with many people involved in the R&D, marketing, transportation, etc....
The phase from 2nd to 3rd phase economies (mass production -> mass information/mass customization) is currently under way.
I agree that we are moving to automation, but that process isn't exactly in the near future. Granted, I'm not extremely knowledgeable here, but I would assume it truly began with the printing press. It has been a slow process.
If I really wanted to play devils advocate I could easily argue the transition to automation began around ancient Rome's time. They began phasing out human labor with their cranes and pulley (sp?) systems.
So I agree that things are steadily becoming more automated, and with the technological boom of the last century, it is reasonable to assume the transition will continue at a more rapid pace. I don't think we can exactly put a timeline to it though.
I doubt the ancient world saw the destruction of their technology boom coming... Another Dark Age could be around any corner.
I agree that jobs will still be available though, at least in regards to overseeing the machinery.
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Does raising minimum wage cause inflation?
I think so. And raising the minimum wage will be a big help for those who needs extra cash for their basic needs. In break with most retailers, Costco's CEO states he supports President Obama's call to boost the minimum wage. But while the President wishes to raise it to $9 an hour, Costco would let it go even higher, to $10.10 an hour.
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Does raising minimum wage cause inflation?
No. I think you might be confusing causation with correlation. Minimum wage is periodically raised to help keep up with the effects of inflation, but not to cause it. Having a means of credit and money as debt helps perpetuate inflation in my opinion.
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Does raising minimum wage cause inflation?
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Originally Posted by jonquest
inflation is an increase in the money supply.
That is only partially true. A slim part..
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Does raising minimum wage cause inflation?
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Originally Posted by IgotQuestions
No. I think you might be confusing causation with correlation. Minimum wage is periodically raised to help keep up with the effects of inflation, but not to cause it. Having a means of credit and money as debt helps perpetuate inflation in my opinion.
yes, i would agee, altho i'm no expert. the private federal reserve creates what is hoped small inflation to avoid the opposite effect of deflation, which would cause our assets to begin to lose value while our debt increased value. deflation would be a real disaster i hear. of course the other natural effect of inflation is that the people who print the money and sell it to our gov't make shitloads of profits on it while the rest of us get hosed daily without even seeing it. :twocents:
has anyone checked bit coin lately, it is now larger that some national currencies. this could be the solution to artificial induced inflation i hear.
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Does raising minimum wage cause inflation?
Well inflation has little difference between fiat and deposit currency, more with the facilitation between production and trade. When you do increase the money supply, it becomes increasingly worthless which is the main definition of inflation. However, this can be offset by production and/or trade in the real world growing at the same rate of increased creation of debt (which is money, because without money there could be no debt and the other way is true as well).
The Government who prints the money (fiat currency) only makes up about 5% of total monetary value in the system. Money gets created and destroyed every second of every day. Do you wonder where the bank gets its money to give people who take out student, auto, home, or any other types of loans? It simply creates it out of nothing and writes it into your account or check for you.
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Does raising minimum wage cause inflation?
its a silly question. minimum wage increases dont cause inflation to rise. its the reaction to it that does. all the way from you having more money to spend, employers feeling like they have less so bump up their prices etc etc etc etc.
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Does raising minimum wage cause inflation?
hello. i like the avatar. cat-on-cat cruelty makes me happy. i see you have lost interest here. it was a good question. every time people begin answering economics, my head hurts. more pay does equal higher value for what the market share can support. it is greed, plain and simple. dollar values have been causing an internal devaluation of our currency with the systemic bail outs, rampant printing and spending, and bank-to-bank lending at near zero percent. our dollar keeps buying less and less, so stuff costs more and more= internal devaluation. eventually we will be using the money for wall paper once again- and future antique treasure hunters will discover these walls coated with worthless dollars of today- and make a fortune. today, the dollar is worth less than 5% of its value after the last great depression. prices do remain relative to what the market will support, but those poor people suffering at the base of human dignity need to be active consumers, and not just survivors, for a robust economy. if you are paying more than 25% of your income for rent or mortgage, i recommend you hook someone in a similar situation- to share the expense. tough times, indeed.:thumbsup:
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Does raising minimum wage cause inflation?
Actually, things cost less today than they do in the 1930's compared to that of what the minimum wage is.
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Does raising minimum wage cause inflation?
Contrary to most merchants, Costco is siding with Obama in his call to increase the federal minimum wage to $9 an hour. In fact, it would do the President one better, supporting a minimum hourly wage of $10.10.