If the minimum wage is increased, will inflation go up proportionally and just make everyone else poorer?

Answer 1

Wow - someone who understands economic principles.

Yup, they'll all be complaining about paying 6 bucks for an order of fries.

Help! Teddy Kennedy's driving now - I want off the bus.

Answer 2

A lot of good answers but I have to include my two cents. First inflation won't go up much mainly because there is such a small percentage of people actually making minimum wage.

I don't know of any job that actually pays minimum wage. Even McDonalds and other fast food places generally pay well above minimum wage. Then you have all the jobs that are exempt from paying the minimum wage.

Which begs the question, why raise the minimum wage. The reason is simple many labor contracts are tied to the minimum wage and workers in these unions will get automatic raises whenever the minimum wage is raised. Here again you're not talking about a major portion of the work force most workers are not in union jobs. Basically it is being used to pay off the union support of one of the two major parties, guess which one.

Answer 3

The fraction of goods and services due to minimum wage workers is very small in the cpi and gdp. Also many states already have minimum wage laws higher than the the federal minimum. In theory there will be some upward pressure on prices and some loss of jobs but the effects will be smaller than the fed raising interest rates .25%. If you will feel poorer if you pay an extra dime for a hamburger the answer is yes, but most people will not.

Answer 4

yes.. increased wages means increase in the prices of goods and services ( business have to make up what they've lost in paying their employees higher wages through increasing the prices of their products) increase in prices would then lead to decrease in demand., decrease in demand would mean less people needed to fulfill this demand., meaning unemployment... also companies would sack people because with increased wages, labour would lessen the busiess profitz,,,

Answer 5

No.

In fact the min wage has gone higher in many states already and those wages are higher than the Federal min wage.

So far the world has not gone into economic collapse

Answer 6

sure.. those making above minimum wage's wage isn't going up. But, all those minimum wage jobs out there like fast food, grocery store stockers, etc..... you'd have to be crazy to think that the business owners are going to absord those kind of hourly costs. The prices of our goods will go up.

Answer 7

Yes.
Minimum wage increases only make the cost of goods and services more expensive. The only way a company can maintain their profit margin is to either cut costs (unemployment) or increase prices (inflation). It is very simple: businesses have to MAKE MONEY in order to keep the doors open.

For example, let's just increase the min wage to $100/hr. What will businesses do? They HAVE to increase prices to make up the difference.

Businesses may not immediately increase their prices to make up for the increased costs, but they have to move prices up eventually.

I currently own a company and I would have no choice but to increase prices to maintain my already thin margins, because the government is in my pocket all the time.

Those individuals who say "no" have never owned a company or tried to run a business from which they earn a living. And, all of the degrees in the world do not compare to acually trying to run your own small business. Theory is theory until it is proved in a real world setting.

Our economy will not "collapse", but you will eventually be paying more for your goods and services.
.

Answer 8

It will create a price floor for labor (membership in unions does the same thing). The result is that quantity demanded for labor is less than quantity supplied - hence raise unemployment.

Answer 9

To pay people more than what their skills are worth (what the market demands) will result in employers:
1) cutting jobs
2) doing the work themself or forcing others to work harder
3) raising prices (increasing inflation)
4) going out of business

The way to make more money is to learn a marketable skill. Go back to school. To do the same old job and expect to get paid more each year is a bit odd. As skills get outdated you should expect to get paid less. Consider grocery clerks who used to memorize prices and now mearly scan items. Their pay should drop.

Answer 10

It's much more complicated than that. Read this for an introduction:

http://www.economist.com/finance/PrinterFriendly.cfm?Story_ID=494922&CFID=1195679&CFTOKEN=1291260