A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.
I believe in the United States of America as a government of the people, by the people, for the people; whose just powers are derived from the consent of the governed; a democracy in a republic; a sovereign nation of many sovereign states; a perfect union, one and inseparable; established upon those principles of freedom, equality, justice, and humanity for which American patriots sacrificed their lives and fortunes.
I therefore believe it is my duty to my country to love it; to support its constitution; to obey its laws; to respect its flag; and to defend it against all enemies.
I think you are talking about two different kinds of inflation: wage-inflation and price-inflation. Normally when one says “inflation”, they are referring to price-inflation.
I don’t think raising minimum wage is a leading cause of price-inflation. Most people earn more than minimum wage, so raising it changes nothing for those employees or their employers.
If we are going to continue having “minimum wage” laws in this country, it only makes sense to have those rates be automatically adjusted based on inflation (price-inflation, as published by the BLS). Same goes for marginal tax brackets, deduction limits etc, all should be auto-adjusted based on inflation rates every year.
I’m saying that wage inflation leads to price inflation. How can it not–especially when we are talking about the minimum wage which typically affects the retail industry with razor thin margins. If I own a store with 50 minimum age employees and the government tells me I have to pay them $1.50 more per hour, what are my options? Cut hours? Raise prices? Or, take it on the chin?
My point is, only 4% of the US workforce is paid the current minimum wage (based on my google searches). Let’s say Obama gets his wish and the minimum goes to $9 an hour, and that increase affects 6% of the total workforce (people today making anywhere between $7.25 and $8.99 — my guess it is only that many people, dunno for sure).
I still don’t think that is enough change to cause some kind of drastic price-inflation, because most (90-95%) of the population makes more than that anyway.
And if you don’t like the drastic jump from $7.25 to $9.00 (a 24% overnight increase), that is just more ammunition to index it to inflation and have the minimum wage rate auto-adjust every year — instead of skipping years and them dealing with massive rate increases.
Example: $7.25 minimum wage in 2012, with average inflation rate of 1.7% (in 2012) should yield $7.37 as the new hourly rate for 2013, and lock that formula in going forward. This way we aren’t trying to play catch-up in 2013, for all the previous years that were skipped (2009-2012) since the last increase.
Oh, BTW, I do realize that the $9.00/hour rate is much more than what is warranted. If the auto-adjust yearly based on inflation formula were in effect since 2009, then the 2013 hourly rate should be $7.92.
I think this is more of Obama asking for a ridiculous amount ($9.00) to give the Republicans room to bargain down to the “correct” rate of $7.92.
There will always be the “unemployable” thus no politician will ever terminate all the safety nets. Yes, I know family should help, but not everyone has that option. It all starts with staying in school and waiting until you are in good financial shape to begin new chapters in your life (marriage, kids, etc). By that point, minimum wage should be in the rearview mirror.