What would be the approximate % increase in inflation if the minimum wage were increased by $5?

Question

It would seem to me that raising the minimum wage would be the best way to solve the social ills in our societies. Welfare rolls would drop, the economy would be spurred by people that are now able to buy the basic necessities of life. The government would get more tax revenue and be in a position to drop taxes as a result of higher incomes and higher economic activity. Not to mention it is the right thing to do. The only drawback would be an immedite and temporary spike in inflation as employers pass on the increased costs. This increase can be accompanied by a coincidal corporate tax cut to accomodate increased business costs.


Please only educated responses please! I'm looking for figures.

Answer 1

Well, theoretically, you are correct, except that a corresponding increase in taxes, fees, or fixed costs would offset the inflationary pressures of increase in consumer demand. However, I don't know of anyone who might have done the mathematical analysis to find out what the right amount of adjustment might be. Some writers theorize that a more steeply-progressive income-tax rate might do the trick quite nicely.