Higher Wages & Inflation

I think people are getting lost right now in details and not looking at the big picture. We have been complaining for years for wage growth for low income workers. Wasn’t that always going to involve inflation of everyday goods and services?

Who does this inflation impact? Yes everyone but does it really? Yes 6%-7% inflation impacts me as my company will probably have a 3% annual raise but I am not hurting to buy anything.

Let’s look at those low income workers though. They were making in Louisville around $10/hr and now they can get any job they want for $15-$20/hour with overtime. Is someone who effectively got or has the opportunity to get a 50%-100% raise over the last year and a half affected by 7% inflation? Not really they still have much more buying power and are much better off than they would have been.

My thing is this. If we wanted higher wages for low skilled workers it was always going to look like this. There was never any amount of cajoling that could be done to make employers pay workers more when they were constantly getting more qualified applicatants than they could ever hire.

I joked the other day when I got hired at Humana as an actuary we were like a bunch of kids hanging outside the doors waiting for it to open to rush and get our foot in the door and wedge our way in in front of the other 200 people who wanted that job. Now the area outside our door is clear and we have to go out in the street and grab passersby to talk them into working for us.

I guess my main concern is this. Why are Democrats letting Republicans brand this as economic failure? They wanted the exact same thing. This was implicit in all of their border closings and trade wars with China. Better wages for American workers. We have it and now Biden is being blamed for it like it’s some kind of cancer to our economy.


Democrats can’t really control how Republicans brand things. Democrats can control their own messaging, but when Republicans blatantly lie without being held accountable, it makes it hard to keep up with.


I think there is perhaps some nuance in the messaging. Some people want ‘hardworking Americans’ (I’m going to be a bit loose with my words here) to make more. You know, blue collar guys with dirt under their fingernails. But they don’t want fast food workers making more. And they want people to bootstrap their way to $20/hour, not get a raise because there’s a shortage of labor. Or something along these lines.

We’re mostly actuaries here, who have benefitted for quite a while by having a restricted supply of labor. So.

I generally agree with your other points. This will likely be a net benefit for lower-income people, and a net loss to higher-income people. As someone in the latter group, I’m not bothered by this, other than the fact I might wait longer for a hamburger at lunch.

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I’m not sure that raising min wage will change things all that much without some sort of influence on the number of hours associated with this increase.

$10/hr * 30 hrs = $15/hr * 20 hrs.

In a similar vein: an employer that can support 30 employees at $10/hr will now be able to only support 20 employees at $15/hr.

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Is anyone paying $9 for a loaf of bread yet? :oh_noes:

If a business model is based on paying people less than a living wage it is a bad* business model. (* the rest of the economy/society must pick up the difference to get those employees to a living wage, assuming we want those workers to live).

I do not disagree. My point is that just raising the min wage isn’t going to solve this particular problem or create a different sort of problem.


Similar to what Mathman said the perception that a job isn’t worth it is part of the problem. Work gets assigned a social value somewhat independent of the works economic value. So when jobs that are lower on the social ladder get raises or are harder to fill or require better working conditions and times people blame the values of the workers not the misalignment of the economic factors. Rising status of people below you* is perceived as a threat to your social status just as rising status of people above you is perceived as an opportunity for you. (* general you).

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I agreed with your point just wanted to clarify. I think pre-COVID this is where we hug.

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Woah. Woah. Woah. Take your ‘promote the general welfare’ crap and get out.

The OP didn’t say anything about a minimum wage. He’s talking about the market wage.

And, people in these service jobs seem to be able to get all the hours they want now.

And, employers can pay those wages because they can raise prices.

So I’m paying more for a burger because the low wage workers making my food aren’t as low paid anymore. I’ll make that trade-off.

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I see that “market wage” is a relative value in the current economy. “min wage” is the baseline and people gauge their “market value” based on how far above the min they are. To this end, increasing the min wage has the default action of reducing the market value of any wage that is above the new min wage (provided that nothing changes except for what the min wage will be).

And the “hour availability” in most places is there because the supply is far below the demand. That is, the employer needs x manhours to operate but only y << x manhours are available. This, I believe, is a function of other factors than influences on min wage; but my main point is that changing one part of the income equation may not (and most likely will not) produce the desired end result of providing a “livable income”.

Democrats don’t brand anything. They suck at messaging. That’s the problem.

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Wages have already cleared every minimum wage I have ever heard proposed without a federal minimum set. This is a moot discussion. I am talking about market reality here. We now have high wages for low skill jobs. My teenage son can go get a $15/hr job and start tomorrow and we live in Louisville KY.

When the prices go up for non-inflationary purposes (like, costs go up because wages go up), people, whose wages didn’t go up (high-income workers), adjust their spending habits.
Inflation occurs when the money supply increases. If that is what Biden is doing (and borrowing from the future, especially when there is no expectation of paying that back will do that), then yes, there will be inflation.

As for Democrats, they never seem to play the, “Oh, you’re against the President? Then you are Anti-American!” card that the Republicans ALWAYS play when they have a President.

I think your logic here is faulty. Basics have to be bought. If high earners are paying more relatively for basics they are going to adjust their spending on non-essential stuff like clothing and cars. When they adjust they are going downward in item cost often into a medium priced good. Meanwhile lower income people have more money to spend on non-essentials so they start buying more of these products or maybe nicer products. This pushes both parties towards the same class of goods.

Things that both lower income people and higher income people are crowding into right now that I can see are as follows:

Chain restaurants
Domestic travel
Mid priced vehicles
Brand name apparel
Home improvement

Higher wages boost inflation not money supply. Money supply has been exacerbated for years. There was no inflation until the government started paying it directly into lower income people hands. Now there is inflation. Nothing inflated except the wealth of the wealthy prior to this because they were the only people that were allowed to get their hands on it with quantitative easing and other mechanisms like low interest rates.


wiki says:

Very high inflation and hyperinflation are harmful events, which economists believe are caused by persistent excessive growth in the money supply.[8] Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities.[9] However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.[10][11]
While SOME wage increases lead to SOME price increases, that is NOT inflation.

I can’t really argue with this. What I don’t know is how they do better without rising to the level of dishonesty of most prominent Republicans. Messaging is a lot easier when you can disconnect it from the facts.

I don’t see anyone else posting about increasing the minimum wage. The current (hopeful, if the news is right) increase in wages for low wage jobs has nothing to do with any increases in minimum wage. It is entirely supply/demand driven.