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Why don't we index the minimum wage to inflation? The 1968 minimum, in todays dollars, is over a third higher than our federal minimum wage today. [0] [0] htt

Why don't we index the minimum wage to inflation? The 1968 minimum, in todays dollars, is over a third higher than our federal minimum wage today. [0] [0] https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_States#Historical_trend https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Sta...

jldugger 6y ago
You probably know this but the opponents of raising the minimum wage fear that it will lead to inflation. The old adage "labor is 2/3rds the cost of everything."
- alex_young 6y ago
  Sure, and there is some logic there, but isn’t the somewhat random real wage a problem? Whatever we select, it seems healthy to index it right?
- fulafel 6y ago
  Many countries effectively do this and it doesn't make inflation get out of habd.
  - jldugger 6y ago
    States can and sometimes do set higher rates than the national minimum. And frankly, a national minimum wage doesn't make sense -- why should wages in low CoL areas like rural Alabama be the same as high CoL areas like NYC/SF? Even state lines may be too coarse grained for minimum wage policies, Since there are many metro areas that cross state lines. On the other hand, economists have been able to treat these places as natural experiments with mixed success: when one state raises the minimum wage but the other does not, you can measure a variety of things, including regional inflation. But it's still difficult to disentangle causation and substitution effects, since the minimum wage directly affects only a small portion of society. The evidence on that front has been... shedding more heat than light. I'm not sure anyone's proved conclusively that inflation does or does not happen, or that unemployment does or does not happen. Probably the most interesting study I've heard of is one looking at restaurants as a sort of model species for minimum wage jobs, the same way that biologists study fruit flys because they have short lifecycles. The supposed evidence there is that the type of restaurants change in response to wage increases: more self-bussing, less staff hired per dollar turnover. The people left get paid more, but fewer people employed overall. That said this was from a podcast discussion and I haven't reviewed the peer reviewed article personally.

jldugger 6y ago

You probably know this but the opponents of raising the minimum wage fear that it will lead to inflation. The old adage "labor is 2/3rds the cost of everything."

alex_young 6y ago
Sure, and there is some logic there, but isn’t the somewhat random real wage a problem? Whatever we select, it seems healthy to index it right?
fulafel 6y ago
Many countries effectively do this and it doesn't make inflation get out of habd.
- jldugger 6y ago
  States can and sometimes do set higher rates than the national minimum. And frankly, a national minimum wage doesn't make sense -- why should wages in low CoL areas like rural Alabama be the same as high CoL areas like NYC/SF? Even state lines may be too coarse grained for minimum wage policies, Since there are many metro areas that cross state lines. On the other hand, economists have been able to treat these places as natural experiments with mixed success: when one state raises the minimum wage but the other does not, you can measure a variety of things, including regional inflation. But it's still difficult to disentangle causation and substitution effects, since the minimum wage directly affects only a small portion of society. The evidence on that front has been... shedding more heat than light. I'm not sure anyone's proved conclusively that inflation does or does not happen, or that unemployment does or does not happen. Probably the most interesting study I've heard of is one looking at restaurants as a sort of model species for minimum wage jobs, the same way that biologists study fruit flys because they have short lifecycles. The supposed evidence there is that the type of restaurants change in response to wage increases: more self-bussing, less staff hired per dollar turnover. The people left get paid more, but fewer people employed overall. That said this was from a podcast discussion and I haven't reviewed the peer reviewed article personally.