Switzerland to Vote on National Wage - Everyone Would Receive 1,700/month

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c03n3nj0 said:

I'm crap at economics, so don't let this question be a judge of character if it turns out to be stupid, but

if everyone was paid a guaranteed amount of money wouldn't that make the prices for everyday goods, like bread and toothpaste, to raise in price? I mean, if I know my costumers all make 1,700 euros on top of whatever they make I'd like raise the price of my sandwich twofold. In the end, with some inflation thrown in, wouldn't the people be left in the same situation they were in before? 

Inflation is overwhemingly caused by the growth in the supply of money by the central bank. Where inflation occurs depends on where government is spending the most (in the U.S for example this is in health-care and education, both areas of the economy with high inflation.) For competitive markets the price of a good approaches its marginal cost (P = MC.) So even though consumers can spend more, these companies (who we call prices takers) wouldn't dare raise prices, because their competition will undercut them. For less-competitive markets, i.e oligipolies and monopolistic competition, the companies have more say in prices (price-makers) but since they are competing with what we call a composite good (all of the other things people can buy) they also won't increase prices, because then people would buy less of their good (these companies are already restricting the supply to maintain their current price.) Generally the argument is that people will more efficiently spend on the things they truly need. So yeah, inflation will occur, but only if the government must print more money to fund this than it would've otherwise. Switzerland is generally good about not devaluing its currency.