(October 7, 2016 at 12:07 pm)Losty Wrote: Can one of you smart people explain to me why raising the minimum wage wouldn't just increase the cost of living?
It's... complex.
Raising the minimum wage allows the lowest income people a sudden surge in buying power... That will lead to an increase in sales and, consequently, in prices, due to the famous "supply and demand" rule: Same supply, more demand => higher price. But this increase tends to take some time... months or more.
In parallel, the minimum wage should be increased (or decreased) yearly in accordance with inflation (or deflation).... which it isn't, is it?
Also, in order to pay your employees the increased salary and maintain your level of profit, you will want to increase prices... Some companies will increase beyond the required and profit more... some already have enough profits so they can absorb the increased expense (LOOOL, like this happens!!)
On the other hand, there are things which suffer no significant increase in cost to produce and so their prices remain largely the same. This then drives inflation slightly down, which makes investors stash their cash in funds indexed to the interest rates, instead of investing in goods for selling. This can lead to less supply, driving prices further up.... but this is a more long range effect.
Now, in reality, what influences the most on you "cost of living"? Is it the food you eat? the clothes you wear? your rent/mortgage? the movies?...
Rent/mortgages tend to be quite stable.... indexed to inflation... (except for places that are growing like crazy... Portland, anyone?)
Food prices fluctuate more with supply than with demand.
Clothing prices fluctuate with what?... where they're made? quality of the materials? Season? On Sale - Buy now!?
So.... which prices will change with an increased minimum wage? Local small businesses.... what else?
