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> The answer is that eventually it gets priced in. There's really not a lot of data supporting this statement. For the most part, minimum wage has remained pre

> The answer is that eventually it gets priced in. There's really not a lot of data supporting this statement. For the most part, minimum wage has remained pretty static between $5-15 in inflation-adjusted dollars. We do have a significant counterexample which disproves your thesis from the early 20th century - minimum wage was set at 25 cents (previously there was no minimum wage) and increased 5 cents per year until it reached 40 cents. So that's at least an 80% increase, and all of this during a big economic recovery. Obviously the WWII boom was also a factor, but the nation went from abject poverty to boom times in a scant 20 years, and I don't think you can say that the minimum wage was eroded. To the contrary, it set the standard of living that has prevailed to this day. Frankly, a market crash precipitated by a minimum wage hike has never happened, and I don't think it would happen. The worst case scenario you posit is modest inflation. That sounds like a pretty tame worst-case scenario, and well worth the risk if we can do what FDR did again, and raise the minimum standard of living for the next century.

prostoalex 10y ago
I'd have to ask you more about the details, i.e. which decades you're referring to, and how much of the recovery was simply cyclical (with Black Friday being the rock bottom), but two observations about using that time period as an example: 1) People had limited or no access to credit facilities, and therefore had little ability to accrue large household debts. One of the phenomena that bothered the economists ever since the dip in oil prices is why isn't US retail sector booming as expected - cheaper gas historically led to more shopping. I am on mobile to google this properly, but eventually they found out that a shopping boom has happened, except slowly and over a previous decade, and most people were using their newfound savings simply to deleverage their credit card debt. 2) The economy was much more localized back then. Local butcher paying the local milkman paying the local seamstress paying the local travel agent paying the local florist paying the local asphalt paver paying the local butcher. The money got recycled. Today the recycling path is more of consumer -> big-box store -> Asian manufacturer.
- WalterBright 10y ago
  > consumer -> big-box store -> Asian manufacturer -> American real estate -> consumer

prostoalex 10y ago

I'd have to ask you more about the details, i.e. which decades you're referring to, and how much of the recovery was simply cyclical (with Black Friday being the rock bottom), but two observations about using that time period as an example: 1) People had limited or no access to credit facilities, and therefore had little ability to accrue large household debts. One of the phenomena that bothered the economists ever since the dip in oil prices is why isn't US retail sector booming as expected - cheaper gas historically led to more shopping. I am on mobile to google this properly, but eventually they found out that a shopping boom has happened, except slowly and over a previous decade, and most people were using their newfound savings simply to deleverage their credit card debt. 2) The economy was much more localized back then. Local butcher paying the local milkman paying the local seamstress paying the local travel agent paying the local florist paying the local asphalt paver paying the local butcher. The money got recycled. Today the recycling path is more of consumer -> big-box store -> Asian manufacturer.

WalterBright 10y ago
> consumer -> big-box store -> Asian manufacturer -> American real estate -> consumer