MikeRox said:
sc94597 said:
This! Inflation is caused by the increase in the supply of money by government. Prices increase because the overall willingness to pay for goods increase in addition to the costs of producing goods and services. Minimum wages create unemployement and push unskilled workers to move to states/cities with lower minimum wages. Furthermore a minimum wage would devestate regions with lower average wages but also lower costs of living. Having the same minimum wage for D.C and San Fransisco as rural West Virginia harms West Virginians as it makes jobs less desirable due to lower productivity and less capital accumulation.
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Wouldn't a higher minimum wage mean that companies in that country have increased production costs though? That in itself contributing to inflation?
Though yes on the "rural" area aspect. The Minimum wage in the UK will disproportionately affect lower paid parts of the country. As the lower cost of living in the northern parts of the UK, means that employees are happy having lower wages than the south/London. However if the wages are going to be identical in both parts of the country, it just basically makes it a no brainer to relocate everything to London and the South East.
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Depending on the elasticity of demand for labor most companies would rather cut workers than increase prices. This is especially true in perfectly competitive markets in which the price approximates the marginal cost. Since the general prices of goods aren't increasing (only specific goods) such price increases aren't categorized as inflation. For certain crucial goods like oil though there is something called cost-push inflation in which higher production costs in said good lead to higher costs in many goods, and since there are few substitutes (unlike labor) the general price of goods increases. If the labor market had no substitutes then inflation would occur via this method, but with automation and outsourcing to other labor markets in other countries it is easier to lay off workers.
