Increasing the minimum wage causes inflation?

It is not always easy to obtain objective information in terms of politically charged problem, such as increasing the federal minimum wage. Proponents and critics tend to strengthen their positions by publishing the opinions of economists who share their political bent. Does it increase its measurable effect on the rest of the economy, including the inflation problem? Yes. Can inflation rate be increased directly to add minimum wage growth? Not necessarily. Both sides of the debate are convincing arguments, but these arguments can be based on beveled or purely theoretical assumptions. Many supporters of increased federal minimum wages support the idea of ​​adapting the new basic wage of the current inflation rate, which is a process known as indexing. In this way, advocates believe that the actual power spent will increase. If wage increases do not keep up with inflation, which has been in recent years, the payouts of workers may be slightly larger, but the inflated prices of goods and services will actually reduce the expenditure power of this increase.

So we know that inflation may have a harmful impact on the actual expenditure force, but does the minimum wage have the cause of the inflation? Yes and no. From an economic point of view, inflation may be caused by any number of new or increased production costs, including increasing wage of workers. If the company has to increase the amount that pays for several dollars, there is obviously new costs that the company must either absorb as the cost of using human work or handed over to customers in the form of higher prices.

economists call this phenomenon cost inflation . Increasing the federal minimum has created an increase in production costs, which subsequently resulted in an inflated price for consumers. However, critics of the inflation of the cost-PUSH indicate that companies can always modify their workforce to compensate for the mandatory increase. It is not always necessary for companies to move expenditure ina more paid workforce for consumer. Increasing the minimum wage can create a temporary or artificial blow to the inflation rate, but can also increase the income taxes or the lack of raw materials.

In short, many supporters attribute the philosophy that the rising tide raises all ships. Whenever staff with minimum wages receive support in household remuneration, staff with a higher effect also tend to receive a similar salary increase. The inflation rate is influenced by so many economic factors that accusing one element seems to be very short -sighted.