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If you made a minimum wage that was significantly above the prevailing wage I'd expect to see inflation in a economy like the US. My wager would be that dollars

If you made a minimum wage that was significantly above the prevailing wage I'd expect to see inflation in a economy like the US. My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy consumer goods rather than stock. We might not call that inflation in the economy generally as after all stocks would "deflate" during that time but in terms of living day to day it would be. Another potential mechanism would be if unemployment went up high enough due to a minimum wage increase that productivity decreases so much that the same number to dollars are chasing the results of less workers. That said, with the exception of very rural areas the wage floor for most moderately skilled or unpleasant work is above $15 an hour already, so this will probably not have much of a impact on poverty or inflation.

macspoofing 6y ago
>My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy consumer goods rather than stock. OK ... but if the money supply stays the same, then all you're doing is just shifting the demand curves from one set of products (stocks) to another (TVs?). Put anther way, some things will go up, and some things will go down because spending habits changed. This happens now. It's not inflation just because the price of roses goes up in February.
- willcipriano 6y ago
  I agree it isn't inflation in the classic sense, I'm not sure of a great term for this effect. A thought experiment, if I printed up a dollar for each one in circulation then put them in a vault that shouldn't cause inflation even though the money supply has doubled, similarly if in a thousand years someone opens the vault and puts those dollars into circulation inflation happens even though the money supply has unchanged. My thesis is dollars that go between hedge fund to hedge fund are "in a vault" compared to dollars that are buying food at the local Walmart. If some of those hedge fund dollars ends up in the hands of a individual (say a minimum wage increase causes firms to halt buybacks and direct that money toward payroll) that would cause inflation of consumer goods as now we have more dollars chasing the same output.
anotherman554 6y ago
This is an empirical question (if raising minimum wage effects inflation) so what you expect in terms of inflation doesn't really matter. This isn't a philosophy question where you can imagine the answer and get a best in class result. Since 2009 people on the Internet have been prophesizing about massive inflation and inflation has been extremely low. Maybe they will one day be right, but like the boy who cried wolf nobody should be listening to warnings about inflation from people on the internet, as a class they don't have any idea what they are talking about.
- mjevans 6y ago
  Offhand, just from my own crummy bio memory of prices of things... I'd estimate about a 50% increase in food prices in about the last decade. I'd also estimate that the asking price of a house was completely out of whack even post the recession in 2008; it _never_ corrected in any of the west coast areas I live in. Still even that price has continued to go up due to inelastic supply and ever growing demand.
  - anotherman554 6y ago
    The government CPI statistics show 18.7% price increase between 2010 and 2020. It's certainly possible that your expenses went up 50% in your presumably super-affluent area of the U.S. It wouldn't surprise me if booming tech companies in certain regions have caused this- but it is not the effect of monetary policy or government minimum wage policy- and my expenses have not gone up much in the last 10 years in my wealthy-but-not super-affluent east coast suburb.
    - ultrarunner 6y ago
      Do government CPI statistics account for "the grocery shrink ray" wherein prices remain fixed but quantities decrease?
      - anotherman554 6y ago
        "The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought." https://www.bls.gov/cpi/questions-and-answers.htm#Question_3 https://www.bls.gov/cpi/questions-and-answers.htm#Question_3 So if families are buying in lower quantities then yes it would be accounted for.
krupan 6y ago
“ That said, with the exception of very rural areas the wage floor for most moderately skilled or unpleasant work is above $15 an hour already” In other words, the whole point of minimum wage laws is really just grandstanding by politicians?

macspoofing 6y ago

>My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy consumer goods rather than stock. OK ... but if the money supply stays the same, then all you're doing is just shifting the demand curves from one set of products (stocks) to another (TVs?). Put anther way, some things will go up, and some things will go down because spending habits changed. This happens now. It's not inflation just because the price of roses goes up in February.

willcipriano 6y ago
I agree it isn't inflation in the classic sense, I'm not sure of a great term for this effect. A thought experiment, if I printed up a dollar for each one in circulation then put them in a vault that shouldn't cause inflation even though the money supply has doubled, similarly if in a thousand years someone opens the vault and puts those dollars into circulation inflation happens even though the money supply has unchanged. My thesis is dollars that go between hedge fund to hedge fund are "in a vault" compared to dollars that are buying food at the local Walmart. If some of those hedge fund dollars ends up in the hands of a individual (say a minimum wage increase causes firms to halt buybacks and direct that money toward payroll) that would cause inflation of consumer goods as now we have more dollars chasing the same output.

anotherman554 6y ago

This is an empirical question (if raising minimum wage effects inflation) so what you expect in terms of inflation doesn't really matter. This isn't a philosophy question where you can imagine the answer and get a best in class result. Since 2009 people on the Internet have been prophesizing about massive inflation and inflation has been extremely low. Maybe they will one day be right, but like the boy who cried wolf nobody should be listening to warnings about inflation from people on the internet, as a class they don't have any idea what they are talking about.

mjevans 6y ago
Offhand, just from my own crummy bio memory of prices of things... I'd estimate about a 50% increase in food prices in about the last decade. I'd also estimate that the asking price of a house was completely out of whack even post the recession in 2008; it _never_ corrected in any of the west coast areas I live in. Still even that price has continued to go up due to inelastic supply and ever growing demand.
- anotherman554 6y ago
  The government CPI statistics show 18.7% price increase between 2010 and 2020. It's certainly possible that your expenses went up 50% in your presumably super-affluent area of the U.S. It wouldn't surprise me if booming tech companies in certain regions have caused this- but it is not the effect of monetary policy or government minimum wage policy- and my expenses have not gone up much in the last 10 years in my wealthy-but-not super-affluent east coast suburb.
  - ultrarunner 6y ago
    Do government CPI statistics account for "the grocery shrink ray" wherein prices remain fixed but quantities decrease?
    - anotherman554 6y ago
      "The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought." https://www.bls.gov/cpi/questions-and-answers.htm#Question_3 https://www.bls.gov/cpi/questions-and-answers.htm#Question_3 So if families are buying in lower quantities then yes it would be accounted for.

krupan 6y ago

“ That said, with the exception of very rural areas the wage floor for most moderately skilled or unpleasant work is above $15 an hour already” In other words, the whole point of minimum wage laws is really just grandstanding by politicians?