Pretty straight forward question, every time I hear about people wanting minimum wage to go up I keep thinking "Wouldn't the price of everything just increase?"
I would suggest looking at the history of minimum wage increases. As far as I'm aware, there isn't a correlation between minimum wage hikes and a lagging inflationary period. Empiricism trumps theorizing about what "should" happen. Or, as stated by Hume, "You can't get an ought from an is."
In a word, yes. Inflation is a complex system effect that has a lot to do with many factors including money supply and confidence in the government, federal reserve, markets, etc. A minimum wage increase doesn't effect the money supply, because it's businesses who are paying, not the fed. What it would do is to cut into corporate profits, whose wisdom one can certainly argue about. I think the data indicate that it would help, not harm, the broader economy.
Actually, I think this conversation should happen from the other end of the spectrum. I really wish there'd be a discussion on why we allow individuals to extract so much from the economy in the 1st place. What reasonable argument is there for ANYONE to be compensated MILLIONS of dollars in salary when have this mountain of evidence that it's not helping humanity in anyway? Nor should anyone be extracting money via the stock market having done nothing, but bet correctly. The entire proposition has been crazy to me.
Suppose Lady Gaga writes and records a new song. It's a hit. We say it's a hit because millions of people are happy to pay 99ยข for a recording of the song. Lady Gaga receives millions of dollars. Each fan receives a song they enjoy. Has anyone been harmed? If you ask me "why we allow individuals to extract so much from the economy in the 1st place" I am inclined to say that it is not my business to tell Lady Gaga or her fans what to do, as long as they are not bothering me. Millions of sales, initiated voluntarily by generally satisfied customers, appears to me a mountain of evidence that people are using their resources as they choose to improve their own lives.
I dont know. I question the use of the word "voluntary" in this American society where you're literally bombarded with marketing and outside influences trying to direct your life from birth for the purpose of profit more than anything else. I mean, from my current perspective, what you're saying is that those millions of people are the architects of their own suffering by allowing a select few to control the resource used as a means of survival in the system (money.)
Do you believe that, if you or someone you approve of can control the way others behave, you will make better decisions for them than they do?the word "voluntary"
You are concerned that advertising influences the way people spend their money, yet you want to talk about "why we allow" people to receive money in exchange for goods and services. If you do not allow people to sell stuff, you are directly controlling them.
Minimum wage workers account for less than five percent of the workforce. These workers also have little access to much of the economy - if you're twenty grand away from buying a Buick, getting an extra grand a year isn't going to do much to lower the demand on Buicks. As others have pointed out, economies are complicated and it's a lot more than money in, money out. Consider how many minimum-wage workers are on Welfare, for example - increasing welfare disbursements should cause inflation, too. So should extending unemployment benefits. Increasing the money in circulation does increase inflation - but when people save or pay down debt, it takes money out of circulation and decreases inflation. It seems like it should - adding more water to the bucket diminishes the percentage of water. But think of it this way - adding more salt to the dough doesn't make more bread. It makes saltier bread. Some quick math: 3.6 million minimum wage workers earning $7.25/hr = $54bln 3.6 million minimum wage workers earning $8.25/hr = $62bln Increasing minimum wage $1/hr = $8bln/year Walmart profit, 2013 = $17bln Minimum wage workers employed by Walmart = 1.3 million Walmart profit if they raised the wages of their minimum wage workers by a dollar an hour: $15bln Business most likely to receive that extra dollar an hour: Walmart And the prices at Red Lobster are most likely untouched.
There was an interesting discussion regarding minimum wage about a month ago, it might be worth giving those arguments a read along with whatever you get out of this.
If you increase minimum wage both cost to producers and demand/spending by consumers increases. Theoretically the small amount of inflation accounts for less than the increased demand/spending. Assuming again that inflation is less than the increase in wages, workers will still have more to spend than they did before (even if it's less than if no inflation had occurred). Because humans aren't perfect logic machines it's a lot harder to predict how stuff like this will affect the economy than lots of economists (and especially non-economists reporting what they've heard from economists) will admit. I'm definitely not an economist, though, so I can't really give much more of an argument than the vague argument I've just presented.
I would say this turns into an ethical question and not an economic one: the price will increase, but is that really such a problem in exchange for a living wage?
If the price of goods increases relative to the increase in minimum wage than the "living wage" won't be a living wage and the minimum wage increase would have been for moot. It has to be an economic decision first, otherwise the ethical portion of it doesn't exist.