Topic: Is increase in minimum wage a good method to fight inflation? - page 7. (Read 2004 times)

carelessly increasing the minimum wage will only create new problems, the logic is simple, when the minimum wage is increased then entrepreneurs will reduce their workers, this is done to prevent excessive company spending, if entrepreneurs don't do that then they will only create a time bomb then It is not easy to increase the minimum wage, there are many considerations that must be studied more deeply.
To overcome inflation, the only one who can come up with a solution is the government, they must provide relief for entrepreneurs and also assistance for workers on minimal wages.

Logically, exactly the other effect should occur. If salaries are increased, this has a rather negative effect on inflation because many service and production jobs for basic and cheap goods are done by people with low wages. If personnel costs rise there, this has a direct impact on prices, which in turn causes inflation to rise.

Depends on the nation, and depends on the average income. For example, in the USA people make around 58k a year right now, that may look great, but someone who works minimum wage could earn as little as 7.25 dollars. Not that many are left like that, because if you offer people that amount, you will not find anyone decent at all, you will left without employees.

But, let's assume that it's true, and you do get 7.25 per hour, that is the minimum wage right now. At 40 hours a week, you make 290 dollars, 52 weeks a year that would make it 15k. In a nation with 58k "average" income, median that is, 15k is poverty and nothing more. Of course people do not make that all too commonly, but if you increased that 100% higher, double the minimum wage, you would still be fine.

Increasing the minimum wage is a good start but to really tackle inflation, we might need more tricks up our sleeve. Like investing in education, making sure people have the skills for better jobs and throwing in some smart social programs. It's all about finding that sweet combo to make sure everyone gets a fair deal without causing other problems

Stabilization of the prices can only be achieved through monetary policy.  The central bank will sell their government bonds to the open market making the money in circulation lesser the the interest rates higher.  The higher the interest rates means that people will encourage to save and put their money in the bank.  This will result to lesser money in circulation and the lesser demand of goods which decrease or minimize inflation.  This is the reason why the government and central bank must not be governed by one entity only.  The Government will handle the fiscal policies (i.e. taxation) while the central bank will focus more on the monetary policies (i.e. money supplies, printing of money).

I agree with you because increasing employee salaries could even trigger an increase in production prices and could cause a company affected by inflation to go bankrupt more quickly because it has to pay employees more. And if government officials also increase the salaries of government officials, then this could also trigger the printing of more money and this will not overcome inflation but will increase inflation to a more severe level. Increasing employee salaries is only necessary to avoid a recession. but fighting inflation is not a solution.

No, I don't think that increasing the minimum wage is going to do any good for the inflation, because the business owners are not going to pay their higher employee salaries out of their own pockets. All additional costs for the business will be added on top of the product and handed over to the consumer. This is just going to make products more expensive and put more money into circulation. The employee itself has more money to pay for all the expensive products and there is no pressure to lower prices again. In my opinion it would be a better approach to make it easier for competitor companies to enter the market and put more pressure on monopol business. New competition is going to push the prices down again and lower inflation. Unfortunately I don't see politicians doing it and are more concerned with handing out gifts to secure their next election.

The answer is simple - no it won't. The causes of inflation lie in another area. And by forcibly increasing wages, we will get nothing but... an increase in the cost of goods and services produced by those who will get a wage increase. Yes, it will affect the purchasing power of workers who have their wages raised, but it will also increase the cost of goods and services they produce for the rest of the population.... In short, simply raising wages will provide a temporary and limited solution that will not fix the problem

If you are familiar with the production function of economics, which tells that income is highly related to labor productivity, technology, and capital stock.  The equation does not contain variables for inflation which means that inflation is not correlated with the income of an individual or household.

 On the other hand, inflation is highly related to money supply.  Money supply is the amount of money being circulated in the market.  The higher the money being circulated (which means that the central bank prints more money) then the higher the purchasing power of the people which pushes the prices to go high.

An increase in the minimum wage will ease the burden on the general population that is employed because they will have more money to spend hence they won't face issues from the rising prices, but what about those who are self-employed? Or merchants that are running their shops or businesses? They aren't going to get things for a lower rate by this method which means that will still not be able to earn enough money. Even if merchants do well by having enough profit margin, those who are self-employed or selling their services will still struggle.

So, there must be some solution that will solve the problems of every person in every sector or category and it shouldn't be an advantage for one group and others should still have to go through tough times.

Increasing the minimum wage can be one strategy to address inflation, as it helps maintain purchasing power for some workers. However, individual citizens can also take steps to mitigate the impact of inflation by investing their money. Investing can potentially protect the value of your money over time, although it carries inherent risks.

if a company only says it offers minimum wage increases/promotion pay rises on par with inflation.. find out if you can ask for extra benefits. such as:
child care costs(pretax)
pension contributions
a business car
mileage(fuel expense)
a business debit card (meal expense)
any other things that are tax deductible

also asking for same pay. but hours off earlier in the afternoon if you can stay efficient to meet production quota/targets
(whereby you then dont need to pay for as much child care or have more time in evening to relax, or do side hustles)


before bitcoin made me independently wealthy to early retire. i worked, and as a hobby played with stocks and shares... and would have preferred to have tax deductible contributions to investment funds where employer matched it(pre-tax).. more so than post tax extra money in salary
if i had kids back then i would have prefered my employer(pre-tax) pay for child care vouchers or paid into a nursery/child care sceme
where by it was not an expense that needed to be paid from my post tax salary. thus freeing up more money post tax for me to spend on other needs. without it on paper showing as me getting extra income, thus benefitting both me and employer, as they can claim those expenses as deductibles on their end thus cut down on their tax burden thus keeps costs down, thus not have to raise prices of the goods they sold

asking for pre-tax benefits help.
for instance
if childcare is like $500 on your end. by having an employer subsidise/contribute. you then have $500 free and clear post tax you can spend elsewhere

if your employers pension scheme was say 5% match. where you contributed 10% and they contributed 5%. if they raised the match to say 7.5% you can then adjust yours down to 7.5% so same money went to pensions fund but you paid 2.5% less so then have a bit more post tax to spend elsewhere.. or you kept your 10% meaning 17.5% went into pension. so you got more higher pension later in life

An increase in the minimum wage should provide an opportunity for people to face inflation because they can adjust the price of goods to buy.
But if you look at it on a much larger scale, increasing the minimum wage is not the only way to fight inflation because if the relationship between inflation is related to an increase in the price of goods, then the party responsible must make goods stable again.
The simple logic is like that and I see that when inflation occurs, people begin to have difficulty meeting basic needs due to uncontrolled increases.
This step needs to be regulated and certain parties must find ways so that society can compensate.

inflation is more based on costs of goods compared to income

EG                2020         2021          2022            2023             2024
hourly rate  ||||||||||   |||||||||||  ||||||||||||  |||||||||||||  ||||||||||||||  (from $10 to $14)
bread:        ||||||||||    |||||||||      ||||||||         |||||||            |||||| (from 10 to 6)

where bread was $1 becomes $2.33
your wage may go up but the amount of bread it gets you is less

When inflation happens, your increased salary never meets the inflation rate, otherwise inflation would lose its purpose. Why does inflation happen? Because governments print money instead of working to earn it, then you have to pay for this money. They can inflate it without increasing your salary but when it comes to EU and developed countries, it's impossible because people will upset and governments will be in a huge trouble, so, while you print money, at the same time slightly increase people's salary to don't upset them too much.

Inflation and salary increase look like this:
Inflation 2020:____________ |2021| _________ |2022| _____________ |2023| ________________
Salary    2020:_______ |2021| ____ |2023| _______ |2023| ______

You see how it goes?

I feel like it is not accumulated wealth, but more about income. You can take the money from the richest %1 and distribute it to everyone equally, doesn't make anyone rich anyway, still is a very low number in the end, and only once so if you misspend it once you are done. You can literally get 50 trillion dollars, and spread it to everyone, and it would be gone in a year at most.

However, if you get proper income taxes, and I do not mean like "oh Nike pays no taxes because they have a Shell company" type of stuff, I mean like actually get the taxes from them, make the law in a way that whatever amount of revenue they made, they are still getting taxed on that, not their "profit" anymore. Find a way, when you do that, money will keep coming it forever.

Exactly mate. Increasing salary or minimum that covers only government workers cannot be the solution to the inflation, it will increase the inflation rate since the government staffs will be able to afford it while others that did not have will keep suffering it.
Moreover, if minimum wages are increased, there will be too much demand of goods, and we know that statistically, too much demand lead to high price of goods and high price is the same as inflation; therefore, to increase minimum wage will go a long way to reduce the hardship but will not bring an end to this inflation.

Increasing minimum wage might not directly fight or reduce inflation because higher wages could lead to increased cost affecting price. When wages go up companies often raise prices to cover up extra cost which will still contribute to inflation. Increasing minimum wage will only increase the purchase power that is the amount of goods and services that can be bought with money which will still have impact on the cost of things. A major way to stop inflation is to reduce spending and borrowing rate.

Increase in minimum wage cannot solve the problem of inflation. If the government wants to increase minimum wage currently it won't be up to 50% increase so what is now the point when the rise in inflation is approximately 80-90% every year. The funny part is that even when the government wants to increase the minimum wage, they don't do that every year it might be every 4 years if not a decade. There are other ways to decrease inflation in a country.

Relying on national resources and increasing manufacturing, exporting of natural resources in the country is one bold step that can help fight against inflation. Since the indigens of a country will not be relying too much on imported goods and services and start patronizing their own productions= firms. I feel this is the best approach. Also putting interest in all of these local production firms will also give way for more employment opportunities giving majority of the youth to have multiple jobs.

A common laborer works hard all day.  Then it is sad for him if he does not get his due.  Because if you work for a company you don't work without your due wages and you can't run your family if you don't get your due wages, if there is inflation then the government is not responsible and those who are involved in the syndicate are responsible.  .
A Labour usually wants to do her job and take care of her family and she can run a good business.  His objective is not his two meals but his objective is to run his household and live comfortably with his family and in that case the government should reduce the inflation.  And the government should.  To control the economy well and give responsibility and dependence on a good honest person.