Quote:
Originally Posted by Justin Scott
Let's say the Federal Government cut Corporate Taxes to 0% and mandated a minimum wage of $24 per hour for large corporations and $15 per hour for small businesses. Both would increase with future inflation.
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Both would
cause Inflation.
Your understanding of "Inflation" is incredibly poor.
Monetary Inflation occurs when the amount of money exceeds GDP. There are too many Dollars chasing too few goods. The price of everything, meaning every
thing, as in every
single thing, including wages, rise uniformly at the rate of Monetary Inflation.
Monetary Inflation, when it is rampant, may be resolved through a single action or combination of actions: decreasing government spending, increasing taxes or raising interest rates.
Monetary Inflation is not an issue in the US. The rate of Monetary Inflation since 1990 has been 0.0% to 0.5% annually on average. Your wages have risen accordingly, and it is a non-factor.
What is a factor is Demand-pull Inflation.
Demand-pull Inflation is caused by Demand increasing faster than Supply, resulting in price increases. This is most obviously seen in housing in a handful of US cities, and in certain energy prices, namely gasoline prices, because the Demand for oil is greater than the Supply.
When you read the reports, it states energy prices have risen, then states the price of gasoline has increased, while the price of other energy, like electric, home heating oil and natural gas have remained flat or actually declined.
That is irrefutable proof of the absence of Monetary Inflation.
If Monetary Inflation existed, then the price of electric, home heating oil and natural gas would have risen, and they would have risen uniformly at the rate of Monetary Inflation.
Some food prices have risen, while others have not. Again, proof of the absence of Monetary Inflation, but proof of the existence of Demand-pull Inflation.
There are only two solutions for Demand-pull Inflation: stop consuming, or increase Supply.
If price increases due to Demand-pull Inflation are affecting people, then Demand-pull Inflation is working as it should. It's purpose is to prevent the depletion, overuse or over-consumption of resources, goods and services.
Increasing wages to match Demand-pull Inflation is incredibly stupid, because the only thing that happens is prices rise that much higher, that much faster.
If people can't purchase certain things, then they need to make adjustments to their Life-Style and Standard of Living, which is exactly how Demand-pull Inflation works.
Another form of Inflation is Wage Inflation, which causes rising prices.
Raising the minimum wage to $24/hour for some companies and $15/hour for small businesses, would create Wage Inflation. Prices would rise accordingly, and you'd be in the exact same position you are now. Wage Inflation occurred twice in US history, and in both cases, FDR and Nixon levied Wage & Price Freezes, in order to stop rapidly rising prices.
There's no possible way to win, so it's best to just learn how to deal with it.
The other form of Inflation is Cost-push Inflation. It occurs when government levies regulations on business and industry that increase costs, and result in price increases. Often, they result in a one-time only price jump, but in many other instances, it results in recurring price increases.
That is the case with healthcare. Every time government requires health plan providers to cover another malady or medical condition, the price of health plan coverage increases.
In Ohio, Cost-push Inflation has been devastating on child care. People were paying $1,800 to $2,000 annually for child care costs, but after the State enacted a law requiring child care workers to have a college degree -- an Associate Degree suffices -- it dramatically increased the cost of child care, so that it costs only a few $100 less than full-time tuition at a major university in Ohio, which is about $9,800 annually.
The first thing that happened was the Supply of Labor for childcare workers was slashed by more than 95%. You can no longer pay minimum wage for child care workers, you now have to pay $12-$15/hour. Few people have the money, the time or the interest to spend 2 or more years to get an Associate Degree in Early Childhood Education to work at a day-care facility, and even those that do often do not qualify for admission to a 2-year or technical college, or drop out for any number of reasons.
Another thing you seem to be ignorant about is wage costs are only one component of labor costs.
Labor Costs = Wage Cost + Benefit Cost + Government Mandated Costs
Government mandated costs include the employer's share of FICA, HI (Medicare), SUTA, FUTA, worker's compensation, and other mandated government costs.
Quote:
Originally Posted by craigiri
Those wages, adjusted for basic inflation, would be $23 to $27 an hour today.
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Only dishonest people "adjust for Inflation," and there's no such thing as "basic inflation."