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>Then the rents of those 1BR apartments would rise to capture that new minimum wage. This is commonly expressed as a consequence of raising the minimum wage, b

>Then the rents of those 1BR apartments would rise to capture that new minimum wage. This is commonly expressed as a consequence of raising the minimum wage, but in the most nuanced discussions of inflation that I've been exposed to, people are mindful of the fact that inflation ripples out into different segments of the economy in different ways. I think the most plausible outcome is that certain segments of the economy function as shock absorbers, which take the hit of inflation disproportionately as the economy rebalances itself and relieves pressures on segments of the economy that were being squeezed unsustainably hard. And so there is indeed a ripple effect of raising the minimum wage, namely there's more money to spend, but it radiates out into the economy in disproportionate ways, and can be a net benefit to wage earners because prices on critical necessities may rise, but not in proportion to the rise in wages.

nostrademons 5y ago
That's a real phenomena, of inflation rippling outwards and occasionally hitting buffers that cannot pass the price increase on and hence take the hit of inflation disproportionately. Unfortunately it rarely works the way any progressive would want it to. The "buffers" are firms in competitive markets - basically anyone who can't raise prices because there are dozens of other competitors doing the same thing and one of them is going to undercut you if you try. This includes most unskilled labor, many small businesses, small farmers, etc. It most definitely does not include the S&P 500, who got to be one of the top 500 biggest companies by having high margins, economies of scale, and pricing power. This is why the S&P 500 index is roughly double what it was two years ago, while median real wages have fallen about 5%.
- galangalalgol 5y ago
  Minimum wage has always seemed to me to be an unfair way to mandate a minimum standard of living. You are placing that burden solely on business sectors that cannot automate most of their workforce. I don't know what the right naswer is, both universal income and negative income tax have issues too. Sunsidized housing... Yeah I have no answers.
- glenstein 5y ago
  I think the phenomenon you're talking about at the end of your comment is something that happens in spite of the beneficial effect of increased wages, rather than something that would count as evidence that people don't benefit from increased wages. Otherwise it would stand to reason that cutting wages would turn the equation inside out, so that buying power goes up with lower wages and economic gains go increasingly to the bottom of the more you lower wages. I don't think that it swings one way or the other, which is to say I don't think that they're so determinative of each other. Those two things just seem too remote from each other to be regarded as in immediate causal connection. There are other contributing variables exerting their influence at the same time: investing, and lending, and spending, and taxing and policy choices are significant inputs that all happen in parallel with wage increases in particular policy and economic climates that have different outcomes from country to country. It also seems to fly in the face of reason to suppose that efficient markets don't see market-wide increases in prices. Firms don't just compete against each other but against the existential question of solvency, and if we're really talking about competitive markets, then these pressures are experienced collectively. So neither the evidence of the stock markets nor the theory about competitive markets never increasing their prices seem to do the work that they would need to do, to suggest that people seeing wage increases are not benefiting from them.

nostrademons 5y ago

That's a real phenomena, of inflation rippling outwards and occasionally hitting buffers that cannot pass the price increase on and hence take the hit of inflation disproportionately. Unfortunately it rarely works the way any progressive would want it to. The "buffers" are firms in competitive markets - basically anyone who can't raise prices because there are dozens of other competitors doing the same thing and one of them is going to undercut you if you try. This includes most unskilled labor, many small businesses, small farmers, etc. It most definitely does not include the S&P 500, who got to be one of the top 500 biggest companies by having high margins, economies of scale, and pricing power. This is why the S&P 500 index is roughly double what it was two years ago, while median real wages have fallen about 5%.

galangalalgol 5y ago
Minimum wage has always seemed to me to be an unfair way to mandate a minimum standard of living. You are placing that burden solely on business sectors that cannot automate most of their workforce. I don't know what the right naswer is, both universal income and negative income tax have issues too. Sunsidized housing... Yeah I have no answers.
glenstein 5y ago
I think the phenomenon you're talking about at the end of your comment is something that happens in spite of the beneficial effect of increased wages, rather than something that would count as evidence that people don't benefit from increased wages. Otherwise it would stand to reason that cutting wages would turn the equation inside out, so that buying power goes up with lower wages and economic gains go increasingly to the bottom of the more you lower wages. I don't think that it swings one way or the other, which is to say I don't think that they're so determinative of each other. Those two things just seem too remote from each other to be regarded as in immediate causal connection. There are other contributing variables exerting their influence at the same time: investing, and lending, and spending, and taxing and policy choices are significant inputs that all happen in parallel with wage increases in particular policy and economic climates that have different outcomes from country to country. It also seems to fly in the face of reason to suppose that efficient markets don't see market-wide increases in prices. Firms don't just compete against each other but against the existential question of solvency, and if we're really talking about competitive markets, then these pressures are experienced collectively. So neither the evidence of the stock markets nor the theory about competitive markets never increasing their prices seem to do the work that they would need to do, to suggest that people seeing wage increases are not benefiting from them.