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Old 07-23-2019, 09:40 PM
 
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How inflationary is the federal minimum wage rate?

Although labor contributes a substantial portion, labor is only a portion of aggregate products' costs; (this is true even among service products). The federal minimum wage rate effects Low-wage labor and has extremely little proportional effect upon higher wage rates, it is not among the primary causes of U.S. dollar's losses of purchasing power.
The federal minimum wage rate's purchasing power's much less a cause and much more a victim of U.S. Dollar's inflation.
Federal minimum wage rate's purchasing power's purpose is to reduce incidences and extents of poverty among USA's working-poor.
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Old 07-24-2019, 02:55 AM
 
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Quote:
Originally Posted by Supposn View Post
How inflationary is the federal minimum wage rate?
Inflation is almost exclusively a monetary phenomenon. The existence or absence of a federal minimum wage has essentially zero effect on inflation.

Quote:
Originally Posted by Supposn View Post
The federal minimum wage rate effects Low-wage labor and has extremely little proportional effect upon higher wage rates
Untrue, of course. There is a well documented substitution effect: minimum wage laws create economic incentives to substitute out relatively low quality and hence low wage employees while simultaneously substituting in relatively higher quality and hence more expensive employees.


At any rate, all the measures of inflation show it is about 2% and most every economist agrees that overstates the true inflation rate by between 2% and 5% because of flaws in the way the BLS calculates its indulgently named “Hedonic Adjustments.”
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Old 07-24-2019, 12:02 PM
 
Location: Ohio
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Quote:
Originally Posted by Supposn View Post
The federal minimum wage rate's purchasing power's much less a cause and much more a victim of U.S. Dollar's inflation.
Why don't you try to understand Inflation before making inane comments?

Quote:
Originally Posted by RationalExpectations View Post
Untrue, of course. There is a well documented substitution effect: minimum wage laws create economic incentives to substitute out relatively low quality and hence low wage employees while simultaneously substituting in relatively higher quality and hence more expensive employees.
That's true.

There's another "substitution effect" too based on Opportunity Costs. Minimum wage is primarily targeted for inner-city/urban minorities, especially "youths."

At $5.15/hour it isn't really worth it for Billy Green-teeth to drive from Hicksville in Clermont County to Cincinnati to work. But, raise minimum wage to $7.25/hour and you just made it worth his while and he's living high on the hog.

And yes, he gets the job, because he actually has a high school diploma unlike his competition who have extensive juvenile records and no diploma. So, the increase in minimum wage ends up not helping the people it was intended to help.
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Old 08-01-2019, 08:48 AM
 
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Quote:
Originally Posted by RationalExpectations View Post
Inflation is almost exclusively a monetary phenomenon.

I'd disagree here. Increases in productivity and technology have been a tremendous deflationary force that has largely counteracted price increases that would be expected with given such a large increase in the global monetary base. Prices would be rising 5%+ for the last few decades rather than 1% to 2% without these productivity increases.

I also tend to think a minimum wage increase is somewhat deflationary since it changes the ROI for additional labor vs. investment in labor saving technologies. These labor saving investments drive productivity gains which are very deflationary over the long term.
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Old 08-01-2019, 09:50 AM
 
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Quote:
Originally Posted by Pfalz View Post
I'd disagree here. Increases in productivity and technology have been a tremendous deflationary force that has largely counteracted price increases that would be expected with given such a large increase in the global monetary base. Prices would be rising 5%+ for the last few decades rather than 1% to 2% without these productivity increases.
You're referring to what the BLS indulgently refers to as "Hedonic Adjustments" -- changes in technology effecting the quality of goods in the BLS' official market basket of goods at which they look.

There are well-known problems with BLS methodology - for example, by the time a new product enters its market basket for inflation calculation purposes, that product has already declined in price substantially. Let's take cell phones as an example. The first cellular telephones were introduced in 1984, were the size & weight of a brick, cost the equivalent of $10,000 in today's dollars, and were giant pieces of crap. By the time cellular telephones made their way into the BLS market basket of goods, they had already declined in price by over 95% (hence that price decline was not included in official calculations) and had improved to the point of actually being useful.

Still, those are changes in individual prices in response to changes in technology and productivity. Inflation is a change in the OVERALL price level. In the simplest textbook example, double the price of everything (goods, services, compensation, savings, asset bases, etc etc) and everything is double - yet the REAL price of anything hasn't changed.



Quote:
Originally Posted by Pfalz View Post
I also tend to think a minimum wage increase is somewhat deflationary since it changes the ROI for additional labor vs. investment in labor saving technologies. These labor saving investments drive productivity gains which are very deflationary over the long term.
I see your point - but I think you're referring to changes in specific prices (e.g., minimum wage labor) rather than the overall general price level.

At the end of the day, we have a real-time real-world experiment going on in several cities and states. Politicians, in their wisdom, have decided to raise minimum wages. It is a done deal in several locations, and businesses are adapting. Over the course of the next several years, we will have actual data. At that point, all arguments about what might happen will be moot - we'll know what actually happened. I suspect it will be the topic of more than a few undergraduate economics quantitative theses and perhaps some graduate dissertations as well.


****


You're right about impacts on inflation measures, which everyone agrees are very imperfect estimators of actual inflation. Most economists point out the imperfect estimators show about 2% inflation right now, give or take a little bit, while they also say the imperfections in those estimators overstates true inflation by about 2% (minimum) to 5% (only a few outlier economists think it is this far off). Thus, the consensus is that true inflation is around zero for things people actually buy.
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Old 08-01-2019, 11:02 AM
 
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Quote:
Originally Posted by Mircea View Post
... There's another "substitution effect" too based on Opportunity Costs. ...
Mircea, are you referring to the federal minimum wage rate or something else? The federal minimum wage rate is $7.25 per hour.
States have, and some local governments have or were granted authority to enact greater minimum rates within their jurisdictions. I don't suppose that's what you're referring to?[/quote]
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Old 08-01-2019, 12:05 PM
 
1,355 posts, read 707,363 times
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Quote:
Originally Posted by Mircea View Post
Why don't you try to understand Inflation before making inane comments? ...
... Minimum wage is primarily targeted for inner-city/urban minorities, especially "youths."

At $5.15/hour it isn't really worth it for Billy Green-teeth to drive from Hicksville in Clermont County to Cincinnati to work. But, raise minimum wage to $7.25/hour and you just made it worth his while and he's living high on the hog.

And yes, he gets the job, because he actually has a high school diploma unlike his competition who have extensive juvenile records and no diploma. So, the increase in minimum wage ends up not helping the people it was intended to help.
Mircea, due to the concept of wage differentials, the federal minimum wage rate's purchasing power's effects are critical upon all lower-wage, and substantial upon all medium-wage rates, (i.e. the minimum's rate effects upon no less than 40 percentile of USA's wage earners is no less than substantial).

Lower wage earners far outnumber medium wage earners.
Employees earning no more than exactly $7.25 per hour are a small minority of USA's lower-wage rate earners.
Since February-1968, the federal minimum wage rate has lost 39% of its purchasing power.

Regrettably, you're ill-informed regarding what's being discussed within this thread.
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Old 08-01-2019, 12:20 PM
 
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It will be highly dependent upon industry... Those highly aligned with min wage legal labor will see the greatest increase in price/inflation. There will be a high degree of pressure to improve automation/AI/Robotics where possible and also leverage illegal immigration labor also where possible.
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Old 08-01-2019, 12:44 PM
 
Location: Ohio
20,106 posts, read 14,345,802 times
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Quote:
Originally Posted by Supposn View Post
Mircea, are you referring to the federal minimum wage rate or something else? The federal minimum wage rate is $7.25 per hour.
If you're not smart enough to understand that the federal minimum wage was $5.15/hour then you probably shouldn't be posting here.

Here's a better place for you to be:

https://www.sesamestreet.org/

I would explain Opportunity Costs and how they relate to Labor Markets, particularly with respect to Labor Market Access, but it would just confuse you.


I don't suppose it would ever occur to you that the increase in the federal minimum wage from $5.15/hour to $7.025/hour in part caused the Great Recession.



The Export Industry directly and indirectly lost 3 Million jobs because of the minimum wage increase.


It made it much more difficult to compete against others, like Romanians who currently only earn $310/month.


In spite of the fact that the average wage is $310/month or $1.78/hour, 98% of Romanians own their own home or apartment (yes, in other countries you can buy apartments instead of renting them).



Quote:
Originally Posted by Supposn View Post
Mircea, due to the concept of wage differentials, the federal minimum wage rate's purchasing power's effects are critical upon all lower-wage, and substantial upon all medium-wage rates, (i.e. the minimum's rate effects upon no less than 40 percentile of USA's wage earners is no less than substantial).
Purchasing power is irrelevant and not the reason the original law was enacted.

Quote:
Originally Posted by Supposn View Post
Lower wage earners far outnumber medium wage earners.
Immaterial and irrelevant.

There's no Law, Theory, Theorem or Corollary in the Law of Economics governing wage distribution.

Quote:
Originally Posted by Supposn View Post
Employees earning no more than exactly $7.25 per hour are a small minority of USA's lower-wage rate earners.
Immaterial and irrelevant.

Quote:
Originally Posted by Supposn View Post
Since February-1968, the federal minimum wage rate has lost 39% of its purchasing power.

Regrettably, you're ill-informed regarding what's being discussed within this thread.
Your imitation of Herr Josef Göbbels is spot-on.

The federal minimum wage law wasn't enacted in February 1968.

The federal minimum wage law went in effect October 1938 or about ~30 years prior to the date you deceitfully cherry-picked.

So, out of 696 months, you cherry-pick one single month to make a baseless argument on a subject you don't even understand.
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Old 08-01-2019, 01:09 PM
 
1,355 posts, read 707,363 times
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Quote:
Originally Posted by RationalExpectations View Post
...
Quote:
Originally Posted by Supposn View Post
... The federal minimum wage rate effects Low-wage labor and has extremely little proportional effect upon higher wage rates, it is not among the primary causes of U.S. dollar's losses of purchasing power. ...
Untrue, of course. There is a well documented substitution effect: minimum wage laws create economic incentives to substitute out relatively low quality and hence low wage employees while simultaneously substituting in relatively higher quality and hence more expensive employees.

At any rate, all the measures of inflation show it is about 2% and most every economist agrees that overstates the true inflation rate by between 2% and 5% because of flaws in the way the BLS calculates its indulgently named “Hedonic Adjustments.”
RationalExpectations, I was unsure what's the point of your mentioning “hedonic adjustment”? Defining “hedonic” didn't help. I then searched “hedonic adjustment”.
How do you relate this to the question, “how inflationary is the federal minimum wage rate”?
////////
https://www.merriam-webster.com/dictionary/hedonic

Hedonic adjective … 1 : of, relating to, or characterized by pleasure
2 : of, relating to, or characterized by hedonism
/////////

Inflation hedonic adjustment
Hedonic Adjustments Downplay Inflation. But typically, that doesn’t happen. The old product disappears when the new product appears, and when features are upgraded, companies loudly announce the enhancements (and in a soft voice, the higher price). When features / ingredients are downgraded, the companies say little to nothing.
Hedonic Adjustments Downplay Inflation | Seeking Alpha
seekingalpha.com/article/92522-hedonic-adjustments-downplay-inflation
//////
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