Topic: Is increase in minimum wage a good method to fight inflation? - page 3. (Read 2003 times)

Some economists argue that increasing the minimum wage is a vicious cycle of increased inflation. They claim that the increase in the minimum wage causes increased operational costs, which increase prices even further; thus, inflation continues to rise.

The issue lies in the disproportionate analogy between salary and inflation. Salaries have remained relatively stable the last few decades, while everything else has been rapidly increasing. Real estate, automobiles, groceries, gasoline, and electricity costs have skyrocketed, and current salaries can no longer keep up with the massive increases.

In summary, inflation has increased disproportionately compared to the minimum wage, the results of which are shown today.

Every laborer always wishes for a salary increase. That's no-brainer because that means they can now afford more things, whether it is necessary or not really. The only thing that I can see it wrong is if the banks or governments are going to print more money for this to be possible. That can only worsen the current inflation rate and many will just wish that this idea didn't happened. The suggestion you have given there of fixing the price of the goods instead is a better solution than it.

There are many reasons on why a high inflation can occur and maybe too much printing of money is already there happening. The governments or the banks, might want to work them out too if they are really serious on decreasing its rate. I won't say putting it to an end because that seems not possible, as even at this point we still have this issue of inflation. In our country or locality, I'm happy to say that our wages here have improved through the years even if its rate is only small but that's better and I didn't complain about that.

This makes us survive the harmful effects of the inflation. I guess that was a clear answer to the OP's question. I only hope that good acts like that can also happen on other countries with or without an increase in the inflation.

Increase in minimum wage isn't the best of option to beat inflation but it can help during the process of trying to ease the inflation. Since inflation can happen from different sectors and may require a bit of time to correct, the government can use increasing minimum wage to make the living of the citizens more bearable untill the whole system is settled and on no bases should the business owners/marketers/sellers  manipulate the price of goods to meet up the increase, it shouldn't happen on the watch of a good government.

My country is experiencing such inflation and of recent the government just increased the minimum wage while we wait on the bold step they take to adjust the settings.

Increasing minimum wage when there is high inflation is a economy suicide, they will only be increasing supply of money in circulation which means it will devalue even more and when marketers and sellers noticed this, they know that inflation will definitely increase, so they quickly adjust their own price up again to meet up with the inflation and then things become even more expensive.

Come to think of it, why increase the minimum wage when you can just battle the inflation down, fight it and make it as low as possible, people will not even ask for increase in minimum wage, only incompetent government will dare try such, they will only be adding more problems to more problems.

Inflation is one thing that has affected the economy of most countries in the world lately but the people in the government has failed to tackle the main problems surrounding them which is a way to bring about good development, working of their (GDP) reducing the unemployment rate and working to reduce the rate at which they make use of imported goods in their country when they are supposed encourage their home made products by using them.

From your comment I believe you are referring to the Nigerian government who has promised to increase the minimum wage of her citizens while they are doing nothing to reduce the inflation rate which is the main source of their problem.

They are not planning to bring down the price of petrol because they shamefully import the petrol that is used in the country and since they pay the amount in dollars and the price of dollar to the Naira is very high ($1=1587), there's no way they can reduce the amount of petrol and the price of commodities will keep going higher. How do we expect the country where the politicians are sponsoring people to protest against the unarmed protesters who are protesting for a better Nigeria to get better?  until they tackle inflation the increase in the Minimum wage is rubbish in my opinion.

If we talk about inflation of a country and to fix it, we need to solve a lot of different problems and that is beyond our capacity, even the government cannot solve it.

For example, you want the Government to reduce gasoline prices. How will the government reduce gasoline prices while world gasoline prices are increasing due to political instability between major powers? It is true that the government is responsible for inflation as well as the economic situation in the country, but we also need to know one thing. The instability of world supply and demand is also an indirect cause of our country's instability and is beyond the control of our Government.
Not to mention, when it comes to politics, it doesn't just stop at home, sometimes our country's instability also involves big countries and outside forces...

So instead, my solution is to stop waiting for the government to solve the problem, we should find solutions to save ourselves.

We live in a country where the leaders can't properly handle the administrative duties of the country or should I just say that they are nonchalant and perhaps ignorant..some people actually think that increasing the minimum wage is the solution whereas the point you made is just what needs to be done, if the prices of things keeps on increasing whether the minimum wage increases to a hundred thousand naira it would have no value, reducing the inflation is the only solution and it would start from reducing the price of petrol

You are making a good point my friend, but if the government did not fix the economy as a whole and better the living of the citizens, improve the investors' confidence, give good policies, ensure there is a positive trade balance and the country is food sufficient among others, nothing like increase in minimum wage will solve the inflation problem for them.

Fine, like you rightly said, the minimum wage will increase the purchasing power of the money in the hands of the workers, but for how long? And how long will the government continue to increase the minimum wage to sustain that effect? Imagine in my country, the government delayed the increase in the minimum wage for about 15 years, and I tell you, when they eventually increased it this year, it was just 2 times the initial amount, what can that do? Otherwise, the government will not be able to pay the increase and many other private sectors will be incapacitated as well. If they force it too much, worse inflation will happen, so they have to be cautious about this.

Now, if the last time the minimum wage was increased is compared to the recently increased one, some goods and services are now more than 10-15 times their value. What will the 2 times increase by the government do to cushion the effect (2 against 10-15)? And it's getting worse day by day, that's my plight as minimum wage is not the solution, it can only ease in some cases and will even aggravate inflation if not carefully planned and implemented.

In my experience it can actually be a bad thing to increase the minimum wage too much during times of high inflation. While people in skilled positions might be getting 5% raises during times of 10% inflation, sometimes minimum wage can be pegged against or jump up 10%, which ends up closing the gap between skilled work and work that anyone can pick up. You would hope that employers would raise wages higher to help, but they often try to suppress them as much as possible. Not only that, if minimum wage is raised to match inflation it can start feeding and inflating the inflation so it becomes a vicious cycle - companies know a large percentage of the population just got a raise so are less bothered about raising prices.

The idea that a minimum wage hike is the answer to inflation? It's not completely wrong, but the fix is only on the surface. Giving people more money is great, but if we don't address the root causes of inflation, we're just playing a never-ending game of catch-up. Increasing pay all the time because prices are going up? That's not an answer; it's just a treadmill. Not only do we need to keep our buying power, but we also need to think about why we depend so much on these economic systems in the first place

Moving from reacting to strengthening our business is what we need to do. Do more than just throw money at the problem; encourage local output and make the market more diverse. Every request for a pay rise is a plea for security in an unstable economy. Putting all your financial security in the hands of the government is a waste of time

We need to help people become more resilient and learn about money. Stop waiting for the next gift and start giving yourself power by learning things that will help you no matter what the economy does. Get out of the cycle of dependence and build your own economy that depends on new ideas and being able to change to new situations

There's no doubt that increasing the minimum wage could serve as a solution to inflation but a temporary solution if the government doesn't do anything to fight against it and boost it's economy. It would give workers buying power to sustain themselves but it depends on the amount they increase it to, that would determine if it would be sustainable, so I think there should be continous upwards review of the minimum wage to make it sustainable as the prices of goods changes. You're right when you said every country should be mindful of it's economy cause if inflation occurs and continue for a long interval whereby they can't tackle it, it would become a problem cause the government might not be able to sustain the minimum wage cause the country experiencing hyper inflation thereby making it difficult to pay workers. I think @TEBT is making a point cause most countries use the US Dollar for international exchange and strengthing their currency against it would further help reduce prices of goods in that country, but that would be a wild goose chase when there's no working government, if they don't encourage local productions, if the government do not build more industries and increase the labour market etc.

Why did you mention strengthening your currency against the US dollar? Well, this is not a must to curb inflation, it is all about what is causing the inflation, okay? Inflation could be caused by too much dependence on importations (negative trade balance), that's where the foreign currencies (not the US dollar alone) should be regarded.

But at times, inflation may be local, which is why local solutions should be preferred in this situation. Above all, every country should be careful about its economy, there should be a working government and such an economy needs fiscal and monetary policy adjustments to fight any form of economic woes, which includes inflation. All hands must be on desks by the government and the citizens so that productivity will increase. It is this productivity that naturally crashes inflation as it would help to achieve more supply than demand.

This is just a band aide solution to the current suffering of people due to inflation but for sure everyone will still suffer especially if there would be another set of price hike of basic commodities.

I don't know economy but what I think the best solution to aid this problem is to boos the agriculture where their country can produce a lot of food products so that there will be no hunger will happen on country and people could able to buy foods at possible more  cheaper price. Oil is somehow one of the problem but I guess if the country is sustainable I guess there might be less issue towards this situations.

It's definitely not a way to fight inflation, take a proper look at the economical situation of Nigeria do you think increasing minimum wage can tackle the issue on ground?? It would be better if the minimum wage was taken back to 30 thousand naira and the price of petrol should be decreased to a 100 naira per litre..80 percent of the goods that have increased in price is based on the increase in transportation amount due to the high cost of fuel, this should be the main thing that should be focused on.. what's the point of increasing minimum wage to an amount that has lost it's value

I think Nigeria is not the only country experiencing food inflation and other rising cost of commodities, it's a global epidemic now. So most countries are discussing modalities on how to address it. Just recently in Kenya the Citizens had to come out en masse to protest against a finance bill that was proposed by the parliament, they believe that they are already in critically stage economically, bringing in another finance bill was being insensitive to their plight as a people, so they had to revolt against the government. So government of various countries will need to help come with means on how to fight inflation within their own countries.

Inflation is not entirely a bad thing if it is properly managed. When inflation is not too much over time it shows a productive and a growing economy. For example, if a country's inflation over a 10-year period is 2-3%, then there is not much trouble, but when the inflation rate moves to about 4% and above in just over a year ten, that's not good. This means there has been an average increase of about 4% in the price of everything. Some things might cost more than 4%, and some might cost less, but I believe you know how difficult it gets when the price of everything increases.

Now, things made this increase happen, I don't want to go into details but what I can say is that inflation is not caused by a lack of money in the pockets of people, it's actually quite the opposite. So adding more money into their pockets by increasing minimum wages won't take the inflation away. I agree it would give them more purchasing power. Still, since the actual causes of the inflation haven't been solved, in a few years, that money would be worth nothing because inflation would have caught up with it, thereby reducing the worth of the currency even further. 

increasing wage is shortsighted solution but people fancy it because they really don't know what side effect it gonna bring and also the prospect of getting more money to buy more things seemed great.
but for economy increasing minimum wage just means all the goods increase in term of price as well. it's probably one of the factor that contribute to the rising of inflation if being honest.

I think people should be more focused in increasing purchasing power parity than just getting that increase in minimum wage, though the latter seems more interesting but it's actually just a short temporary solution and doesn't solve the real problem.
though the effect of increase of minimum wage in its correlation to inflation is still debatable

Dont wait up for inflation to become worst before you would really be making out such action.It would really be that best that you should really be making things early rather than on doing things late.
This is why it would really be sensible that as much as you could or as early as you can then you should really be starting on finding another source of income on which it would really be that understandable or something that you should really be that making in priority.Dont wait up for things to become that high before you would really be acting out fast. You cant really just that make yourself being that too confident specially
into the world where economic state is really that getting worst and more shittier. So it would really be just that right that you should really be doing something before it would affect you.

Find another source of income which it isnt really just that limited into your main job on which we know that options could really be that there.It would really be just that depending on how you would really be dealing or act according into it. There are really just that those people who doesnt mind and get contented on what they do currently have and made out some acts on the time that they are already struggling.
This is where people do have that different conditions when it comes to this.

Minimum wage, whether increased or decreased has no room in economics to fight inflation as it could be a two-edged sword that can either work for or against the intentions of the adjustment. In my understanding, fighting inflation is a different ballgame and it's solely in the hands of the executive government arms of government and the central banks by introducing policies that can naturally adjust the inflation like the fiscal and money policies, which include interest rate hikes/cuts among others.

On the other hand, the minimum wage adjustment is just for the masses to measure up with the current economic situation of the country to cushion the effect of the inflation, nothing more.

Inflation strictly speaking is the expansion and contraction of the money supply.   Since we have fractional FIAT currency this is an active alteration daily, not all money is literally printed of course and more money is created merely by deposit and lending of all banks.

Generally higher wages would only result in lower inflation if productivity went up by a higher percentage then the money given.   Consider wages not as income but a bill to the companies, you have a more balanced argument considering both sides of the balance sheet.

Higher cost labor is a larger part of costs within any product vs margins.  It can make a production process uncompetitive and with lower revenue you can sure you are not helping reduce inflation.