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View Diary: This week in the War on Workers: Raising the minimum wage would increase prices by how much? (38 comments)

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  •  I feel a need to add a qualifier to this (0+ / 0-)

    Labor intensive products and services are much more prone to inflationary pressures than mass produced products. The qualifier though has another corollary that labor intensive products often pay their laborers better than minimum wage and would not necessarily be affected to the extent that minimum wage laborers are. There would undoubtedly some wage increases as minimum wages define the floor of prevailing wages, but it is historically logarithmic in nature. The prevailing wage in a given region generally increases at a slower rate than the minimum wage.

    What will be of interest going forward is how that relationship between minimum wage and prevailing wages change if minimum wage is indexed to inflation. Does the prevailing wage follow the same formula, or do we come to an eventual point where minimum and prevailing wage meet? Or does prevailing wage excel inflation? There isn't much historical data to answer that, but my feeling is that prevailing wage increases would exceed inflation rates because of the perpetually increasing buying power of low wage workers.

    “Birds…scream at the top of their lungs in horrified hellish rage every morning at daybreak to warn us all of the truth. They know the truth. Screaming bloody murder all over the world in our ears, but sadly we don’t speak bird.” Kurt Cobain

    by RadicalParrot on Sat Apr 13, 2013 at 12:40:02 PM PDT

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    •  I'm totally overthinking now.. (0+ / 0-)

      but what i mean by that last paragraph is that low wage workers make up a disproportionate  size of the economy in terms of spending and demand, so increasing their collective share of demand will also increase GDP (unspent or hoarded monies have no effect, or possibly a negative effect on actual GDP). Every bit of spending also increases tax revenues via sales taxes. Every dollar of income increases social security taxes via paycheck with holdings. The only potential drawback of increasing the minimum wage is inflationary pressures, and we debate this at a time when inflationary pressure is non-existent, and indeed when deflation is a real risk despite the huge amounts of money being printed by the fed at this time.

      It all lends to the idea that the real issue has nothing to with the money supply as it currently is, but where that money is currently being held and who is holding it. Increasing the minimum wage is the least that can be done to move some of that hoarded wealth into the hands of people who will actually use it in a productive capacity.

      “Birds…scream at the top of their lungs in horrified hellish rage every morning at daybreak to warn us all of the truth. They know the truth. Screaming bloody murder all over the world in our ears, but sadly we don’t speak bird.” Kurt Cobain

      by RadicalParrot on Sat Apr 13, 2013 at 03:50:01 PM PDT

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