Minimum wage raise cause inflation?

Question

This means that the people on the bottom of the pay scale are making more, so as consumers won't we be paying more for everything?

Answer 1

Could be true or false. Several have explained how a high minimum wage could cause inflation but you could just increase productivity by investing in capital. Unemployment would increase though.

Answer 2

You will, but that doesn't cause inflation. Absent an increase in the supply of money, the imposition of a wage floor would be offset by resource reductions elsewhere and/or a reduction in legal employment.

Answer 3

Inflation by definition is caused by Too Many Dollars Chasing Too Few Goods.

Unfunded Government Mandated wage increases force businesses to raise prices to compensate for the increased cost of doing business. But without there being the money in existence in the economy, those price increases wouldn't be possible. The business would just fail because its cost of production would exceed the revenue it would receive.

But Inflation is a Monetary Policy issue, not a Government induced event. Or think of it like this...  The Fed pours the gasoline all over the house and the Congress lights the match. Who caused the house to burn down? The Fed or the Congress? If the gasoline didn't exist, the lit match wouldn't have set off the combustion reaction.

Key:

Gasoline = Money Supply

Match = Min.Wage Increase

Answer 4

Yes.  If the bottom of the payscale rises, so does the cost labor and thus the price of goods.  It is a ploy to keep the ignorant happy.  There will be a brief period perhaps before the price of goods catches up, but ultimately, it is a waste.

Edit: I can see how the answer below me might work, but that is not how the U.S. operates.  Though I suppose you could be talking about another country and economy.

Answer 5

That doesn't cause inflation.  What makes inflation is more money supply.  Sure the poor would be able to spend more with a higher minimum wage, but it wouldn't affect spending/money in the economy too much.  A bigger effect that would result in inflation is increased money supply.  More money in the economy means inflation-- with more dollars printed (much of it because of lower intersest rates) then inflation enters.  Also national debt can lead to inflation due to devaluing of dollar.  And minimum wage going up is used to help people deal with inflation so no inflation is not caused by any minimum wage increase.