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stinkcat_14
Guest
No.
I think I understand the economic effects of the minimum wage quite well.
You are correct here. Inflation is determined by the money supply, not by the minimum wage.
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stinkcat_14
Guest
I never claimed that economic theory changed. After all, economic theory predicts that one of three things can happen to employment when the minimum wage is increased:
- employment can increase
- employment can decrease
- employment can change by a statistically insignificant amount.
Can you cite the studies linking the minimum wage to inflation?
Nope.
But I do not believe it matters anyway.
All I have to go on is the courses I have taken in college and common sense.
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stinkcat_14
Guest
I would like to know who is teaching you that the minimum wage causes inflation. You certainly wouldn’t find that from most mainstream economists. Think about it for a minute, we employ about 1 million people at the minimum wage. So a $1 increase in the minimum wage would add at most $2 billion in overall labor costs, assuming no decrease in employment and assuming that everyone at the minimum wage works 40 hours a week. That $2 billion is a spec in the context of a $14 billion economy.
But if you have evidence, let’s see it, you just have to remember that when you are discussing things with economists, we tend to probe a little.
C
CPA2
Guest
INFLATION
Who causes inflation? “Government and the government alone is responsible for any rapid increase in the quantity of money…Businessmen do not cause inflation (Friedman).”
Why is inflation called a monetary phenomenon? “Inflation occurs when the quantity of money rises appreciably more rapidly than output, and the more rapid the rise in the quantity of money per unit of output, the greater the rate of inflation (Friedman).”
How does the government increase the quantity of money? “The U.S. Treasury, one branch of government, sells bonds to the Federal Reserve, another branch of government. The Federal Reserve pays for the bonds with freshly printed Federal Reserve Notes or by entering a deposit on its books to the credit of the U.S. Treasury. The Treasury can then pay its bills with either the cash or a check drawn on its account at the Fed. When the additional high-powered money is deposited in commercial banks by its initial recipients, it serves as reserves for them and as the basis for a much larger addition to the quantity of money (Friedman).”
Who pays for inflation? All holders of money pay for inflation.
Explain how inflation is paid. “The extra money printed is equivalent to a tax on money balances. If the extra money raises prices by 1 percent, then every holder of money has in effect paid a tax equal to 1 percent of his money holdings (Friedman).”
Is inflation serious? Inflation is a serious disease that can destroy a society. “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose (Keynes).”
What is the cure for inflation? The cure for inflation is a slower rate of increase in the quantity of money.
How long does it take to cure inflation? It takes time. It takes years for inflation to develop and it takes years to cure inflation.
What are the unpleasant side effects of the cure? There will be a long period of slow economic growth and higher than usual unemployment. There is no way to avoid these side effects.
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TenBobNote
Guest
I had to laugh at your quote from Keynes. Aren’t we supposed to spend our way to prosperity?
Anyway, I would like elaborate on your cure to inflation. The tool I would use to slow and eventually stop, the quantity of new money being introduced, would be to introduce a competing currency. Or better yet competing currencies! To just allow competition in the money market and allow other moneys for legal tender would be the single best thing for the U.S. economy. … a man can dream…
Also, I listened to a lecture yesterday that had a fairly strong critique of Milton Friedman’s Monetarism view of economics, thought you may be interested since your last comment is filled with him.
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CPA2
Guest
You are correct. The problem is not that the government creates its own money. The problem is that the government demands a monopoly on money. The only real money is gold. However, the government makes it illegal to make a contract using gold as a medium of exchange.I had to laugh at your quote from Keynes. Aren’t we supposed to spend our way to prosperity?
Anyway, I would like elaborate on your cure to inflation. The tool I would use to slow and eventually stop, the quantity of new money being introduced, would be to introduce a competing currency. Or better yet competing currencies! To just allow competition in the money market and allow other moneys for legal tender would be the single best thing for the U.S. economy. … a man can dream…
Also, I listened to a lecture yesterday that had a fairly strong critique of Milton Friedman’s Monetarism view of economics, thought you may be interested since your last comment is filled with him.
Governments make war on both gold and God because both threaten government’s control over our lives.
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CPA2
Guest
Honest money is what I want from the government, but that is not what I get. History is repeating itself today. How will it end? My guess is that the dollar will go bankrupt. A repudiation of debt will start a deflationary cycle. We bean counters will not have any beans to count! The following is a quote from Martin Weiss:
Some people never learn; and some governments are equally stubborn in their ignorance.
This is especially true of money and inflation, as the following case studies vividly illustrate …
PHILADELPHIA - MAY 1775
The occasion is the Second Continental Congress.
The debate: Precisely how to pay for the coming war with England.
A minority of delegates argue that to avoid inflation, they must levy taxes, pay mostly in hard currency, and encourage free enterprise to supply the army, the navy, and the militias.
But they’re ignored, even ridiculed.
Instead, Congress issues orders to crank up the printing presses at full speed, and within months, the states do the same.
In the next five years, paper money floods the economy — $241 million in continental dollars … $209 million in state notes … plus countless millions in currency counterfeited by individuals, enterprises, and even the British.
As a result, wholesale prices surge from an index of 108 in 1776 to 10,554 by 1780.
Food shortages are endemic.
Soldiers are ill-clothed and ill-fed.
The citizenry is panicked, plundered, or both.
In June of 1775, the Massachusetts Provincial Congress declares that anyone who refuses to accept state notes or demands a premium for them is an “enemy of the country.” Other states follow suit, punishing violators with public humiliation, fines, imprisonment, and the forfeiture of their goods and property.
At the end of 1776, New England states impose wage-and-price ceilings in a desperate attempt to hold down the cost of military recruitment; and in March of 1777, the Middle Atlantic states follow their lead.
Farmers and entrepreneurs balk. They hoard large stocks of food and goods, refusing to sell them at official prices.
In response, the states pass laws forbidding these practices — crimes called “forestalling” and “engrossing.”
Farmers are forced to hand over their harvests for a pittance. Many are wiped out. Others just quit planting. Supplies dry up, and prices surge even higher.
The Revolutionary War is won. But it’s a miracle — a testament to the sheer bravery and zeal of Americans, DESPITE the financial blunders of their young government.
Some people never learn; and some governments are equally stubborn in their ignorance.
This is especially true of money and inflation, as the following case studies vividly illustrate …
PHILADELPHIA - MAY 1775
The occasion is the Second Continental Congress.
The debate: Precisely how to pay for the coming war with England.
A minority of delegates argue that to avoid inflation, they must levy taxes, pay mostly in hard currency, and encourage free enterprise to supply the army, the navy, and the militias.
But they’re ignored, even ridiculed.
Instead, Congress issues orders to crank up the printing presses at full speed, and within months, the states do the same.
In the next five years, paper money floods the economy — $241 million in continental dollars … $209 million in state notes … plus countless millions in currency counterfeited by individuals, enterprises, and even the British.
As a result, wholesale prices surge from an index of 108 in 1776 to 10,554 by 1780.
Food shortages are endemic.
Soldiers are ill-clothed and ill-fed.
The citizenry is panicked, plundered, or both.
In June of 1775, the Massachusetts Provincial Congress declares that anyone who refuses to accept state notes or demands a premium for them is an “enemy of the country.” Other states follow suit, punishing violators with public humiliation, fines, imprisonment, and the forfeiture of their goods and property.
At the end of 1776, New England states impose wage-and-price ceilings in a desperate attempt to hold down the cost of military recruitment; and in March of 1777, the Middle Atlantic states follow their lead.
Farmers and entrepreneurs balk. They hoard large stocks of food and goods, refusing to sell them at official prices.
In response, the states pass laws forbidding these practices — crimes called “forestalling” and “engrossing.”
Farmers are forced to hand over their harvests for a pittance. Many are wiped out. Others just quit planting. Supplies dry up, and prices surge even higher.
The Revolutionary War is won. But it’s a miracle — a testament to the sheer bravery and zeal of Americans, DESPITE the financial blunders of their young government.
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stinkcat_14
Guest
Getting back to our topic at hand, the point is that the minimum wage has zero effect on inflation.
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Darkbloom
Guest
Well, there is one difference. Now there is 65 years of solid economic research saying MW is a bad idea on many levels.
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Darkbloom
Guest
I was curious why you haven’t responded to my fairly long post addressed to you.
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cynic
Guest
the “equilibrium wage” is nothing more than (loosely defined) the rate at which there is neither an excess of supply or a demand for workers. It’s not based worker contribution to turnover. Conservatives on this thread are trying to mislead…
You may believe this if you wish, but practical experience as well as sound economics and business practices show otherwise.
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CPA2
Guest
Both of you are correct. Have you noticed that when the minimum wage goes up, the prices of motel rooms also go up? That is inflation to me; however, that is not inflation in the academic sense. My salary does not go up just because the minimum wage goes up; therefore, if I spend more money on motel rooms, I have less money to spend on other things. The prices of those other things will go down because there will be less demand for them.
I would be happy if we just agree that the minimum wage, along with the entire Socialist platform of 1928 that the Democrat party adopted, is a very bad idea. The Democrat party is just another version of the Socialist party of 1928. We need a third party very badly!
“The philosophy of socialism is failure (Winston Churchill).”
Ludwig von Mises wrote, “Authors of economics books, essays, articles, and political platforms demand interventionist measures before they are taken, but once they have been imposed no one likes them. Then everyone—usually even the authorities responsible for them—call them insufficient and unsatisfactory. Generally the demand then arises for the replacement of unsatisfactory interventions by other, more suitable measures. And once the new demands have been met, the same scenario begins all over again.”
"After decades of governmental intervention into the health-care arena, the failures are apparent for all to see. But rather than root out the cause of the problem, Americans are demanding that government do something about it…
Most Americans, including many free-market advocates, simply will not—perhaps cannot—face the truth: that the welfare state (socialism) and the managed economy (interventionism) have never worked and can never work. No matter what is done—no matter who is put in charge—no matter what plan is used—the result will always be the same: failure. The sooner we come to grips with this truth, the sooner we can begin traveling the road to a healthy and prosperous society (Hornberger)."
I can accept that, however…
Everywhere I look, inflation is described as an increase of the price of goods or a decrease in the purchasing power of money.
Given that, what you observe in the cost of hotel rooms is inflation.
Likewise the cost of a burger at the local fast food joint.
Both of these are driven higher by the minimum wage.
In fact, every business that employees people at the minimum wage experiences a dramatic increase in their payroll with every legislated increase of the minimum wage.
Now where do you think this increase in their payroll will show?
Actually, it does not matter if the price for the business’ wares goes up or not.
Inflation has already been realized by the business owner in the cost of the payroll going up.
Now if I am mistaken in how this inflation operates, please let me know.
D
Darkbloom
Guest
The idea that you can’t quantify the value of a person’s labor is belied by the fact that there are LITERALLY millions of instances of just this everyday.
A worker would presumably accept no upper limit on how much they would take to do a job; vice versa for employers. The equilibrium wage is where they agree on a price.
That is the supply and demand portion of a wage rate. That notwithstanding, some professions have higher equilibrium wages than others, and the reason is the relative value of the work done. Ceteris paribus, a ditch digger is going to make less than a brain surgeon because brain surgery is simply more valuable to society.
Conservatives on this thread are misleading no one; they simply know what they’re talking about
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jmcrae
Guest
Inflation is when the prices of necessary items go up - groceries, mortgages, and gas.
The prices of burgers and motel rooms don’t affect inflation, because they are optional items - nobody needs them for basic survival.
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tjm190
Guest
Sort of- inflation is an increase of the price level across an entire economy. For example, you can now can a better computer for a few hundred dollars than you could get in the 80’s for tens of thousands. Does this mean we’ve experienced deflation? No- the relative price of computers has changed due to technological progress. This is why people tend to watch the ‘core’ rate of inflation (the one that excludes fluctuations in gas and food prices) to measure the health of the dollar.
But to answer your question- yes, an increase in the minimum wage would increase prices across the economy and thus act as an inflationary force.
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tjm190
Guest
Quite frankly, this is a completely false definition of inflation- in fact, we tend to specifically exclude gas and food when we look at inflation.
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