The coming Minimum-wage increase

[Little-Acorn]

Saw a cartoon a while back (don't you love those solid legal references?) where a fast-food manager is talking to five or six of his crew. He says:

"I have good news, and I have bad news.

"The good news is, a new Federal law says I have to pay you more.

"The bad news is, I can't afford that, so two of you are fired."

.

 

[Iriemon]

Saw a cartoon a while back (don't you love those solid legal references?) where a fast-food manager is talking to five or six of his crew. He says:

"I have good news, and I have bad news.

"The good news is, a new Federal law says I have to pay you more.

"The bad news is, I can't afford that, so two of you are fired."

.

Then how will they serve the hamburgers?

 

[Goobieman]

Saw a cartoon a while back (don't you love those solid legal references?) where a fast-food manager is talking to five or six of his crew. He says:

"I have good news, and I have bad news.

"The good news is, a new Federal law says I have to pay you more.

"The bad news is, I can't afford that, so two of you are fired."

.

One of these days, the liberals will manage to pass a min-wage hike that also makes it illegal to fire people tomake up for the costs associated with the hike.

One of these days.

 

[jujuman13]

Unfortunately Inflation, which is largely caused by Governments, rises thus rendering the $ in your pocket to decrease in value.
This inevitably causes prices to rise, which in turn means that those who earn at or below the poverty line are unable to be able to afford even the basic necessities of life.
So a minimum wage rise becomes almost inevitable.
Unfortunately this also causes inflation as the price of most services and products have to rise in order to pay for the manpower required to make or provide services and products.
The whole thing is a vicious circle.

 

[Iriemon]

Unfortunately Inflation, which is largely caused by Governments, rises thus rendering the $ in your pocket to decrease in value.
This inevitably causes prices to rise, which in turn means that those who earn at or below the poverty line are unable to be able to afford even the basic necessities of life.
So a minimum wage rise becomes almost inevitable.
Unfortunately this also causes inflation as the price of most services and products have to rise in order to pay for the manpower required to make or provide services and products.
The whole thing is a vicious circle.

IMO, you are confusing general with relative inflation. General inflation occurs when there is an expansion of the money supply which raises the prices of everything. Relative inflation occurs when the price of some good or service raises relative to the price of other things.

The Fed's job is to keep an eye on general inflation -- if it thinks inflation is a danger it will (or is supposed to) restrict the growth of the money supply which often has the unfortunate consequence of increasing the cost of borrowing money (ie ineterest) which tends to decrease economic expansion. Conversely, if the Fed thinks inflation is not a danger, it might ease the money supply, which has the opposite effect.

Increasing the min wage increases the cost of labor paid to the lowest paid workers, but as many have pointed out, it is a fairly small percent that are actually paid this low a wage. Goods and services that depend upon the lowest paid wages will experience an increase in this cost, which will generally be borne by either increasing the cost of the good or service, or decreasing the amount of profit, or decreasing the amount paid for other cost items (ie managment salaries). The net effect is that the costs of goods and service may experience some inflationary price increase due to the increase of the cost of low paid labor -- however this is relative inflation and will not affect the price of other goods and services. After time, a new equilibrium is reached where the price of goods and services depending upon low paid labor are relatively higher and everything else is relatively lower. But it does not affect general inflation. It does not create the vicious cycle that you speak of.