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Minimum wage argument is a little fruitless, in my view. It's just moving the yard stick with no real gain. If you said on 1st of Jan the minimum wage was $50,
by nextweek2 10y ago
Minimum wage argument is a little fruitless, in my view. It's just moving the yard stick with no real gain.
If you said on 1st of Jan the minimum wage was $50, businesses would raise product prices to cover the overhead. That leads to inflation. Suddenly a Big Mac jumps from $2.25 to $14.51. Nobody is better off because the ratio has stayed the same.
Of course you cannot peg the price of the Big Mac because you end up in the same situation as Venezuela.
- dragonwriter 10y agoWe have actual experience of minimum wage increases, and considerable evidence that they do not, in fact, keep the ratio the same. Yes, they do drive some inflation, so the benefit isn't as great as one would expect considering price levels before the policy, but inflation due to the change in minimum wage does not eat up the benefit at the level of the minimum wage. Why this should be the case is fairly easy to understand; Minimum wage increases neither create new money nor increase the cost of all inputs (or even all labor) by the ratio between the new minimum wage and the old one, so what they do effectively is compress the gap between the incomes of those making the minimum wage and people higher on the income distribution. As such, the amount of money chasing consumer goods increases (because, while the money supply doesn't increase, more money goes to those with a higher propensity to consume) by less, in total, than the ratio of the new to old wage. But those making minimum wage both before and after have their personal income increase by the full ratio.
- WalterSear 10y agoThis is exactly the kind of armchair economics the study was intended to refute. Complex, nonlinear economic systems can't be modelled using pat, 'village market' ideas.