How inflationary is the federal minimum wage rate?

I'm Supposn said:

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 cause for 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.

Respectfully, Supposn ​

Click to expand...

There is an important disconnect here: poverty is based on (total or combined) household income relative to household size while an hourly wage is based only on the value of the work performed in that single hour by that single working person. It makes no sense to pay workers A and B $8/hour because they are in a two income 3 person household and to pay worker C $16/hour because they are the single income for their 3 person household - based on assuming that $16/hour is required to prevent a 3 person household from being in poverty.

As to the relationship of the federal MW and CPI inflation, that has varied over time. I favor indexing the federal MW for CPI inflation in much the same way as we do for Social Security retirement benefits. The question then becomes: what is the "correct" value for the MW (or which is the correct MW "base year" for use as the index value)?

I'm Supposn said:

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 cause for 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.

Respectfully, Supposn ​

Click to expand...

How inflationary?

Well it definitely doubles the cost to employ an unskilled worker, as the prior Federal minimum wage was $7.25 or thereabouts, although some State's had their own higher minimums.

That doubles the impact on the employer, and cuts into their bottom line after dealing with other fixed and variable costs. Small businesses will suffer most, although mid-sized ones may too.

Regardless, when operating costs go up, affecting profits, then business figure a way to cut costs, increase prices of their products, or both. The first cost to the small business owner is wages so they are likely to fire people or reduce their hours.

Those are the "impacts" we already see in the news.

Captain Adverse said:

How inflationary?

Well it definitely doubles the cost to employ an unskilled worker, as the prior Federal minimum wage was $7.25 or thereabouts, although some State's had their own higher minimums.

That doubles the impact on the employer, and cuts into their bottom line after dealing with other fixed and variable costs. Small businesses will suffer most, although mid-sized ones may too.

Regardless, when operating costs go up, affecting profits, then business figure a way to cut costs, increase prices of their products, or both. The first cost to the small business owner is wages so they are likely to fire people or reduce their hours.

Those are the "impacts" we already see in the news.

Click to expand...

It also changes the relationship of entry level (or lowest skilled) worker's pay to both that of higher skilled worker's pay and to retirees' pension incomes.

Folks often use the burger joint model to compute the cost of labor required to make and serve a burger (on site) relative to the retail cost of the burger, yet always seem to omit the increase in the cost of each of that burger's many ingredients due to the increased labor costs for making and delivering each of them to the burger joint.

At the state/local level the MW often varies based on the size of the employer (e.g. only "large" employers must pay a higher MW and/or supply some added "fringe benefits"). That violates the basic concept of equal pay for equal work.

ttwtt78640 said:

There is an important disconnect here: poverty is based on (total or combined) household income relative to household size while an hourly wage is based only on the value of the work performed in that single hour by that single working person. It makes no sense to pay workers A and B $8/hour because they are in a two income 3 person household and to pay worker C $16/hour because they are the single income for their 3 person household - based on assuming that $16/hour is required to prevent a 3 person household from being in poverty.

As to the relationship of the federal MW and CPI inflation, that has varied over time. I favor indexing the federal MW for CPI inflation in much the same way as we do for Social Security retirement benefits. The question then becomes: what is the "correct" value for the MW (or which is the correct MW "base year" for use as the index value)?

Click to expand...

Ttwtt78640
The only product that the poor can sell, is their labor. If that's undervalued, they're undervalued.

The federal minimum rate's purchasing power peaked in February-1968 and it wasn't a particularly great boon to the working-poor then. The minimum wage rate will never be anything more than hard-earned.
But that doesn't justify the reduction of its value since then. Its purchasing power has been reduced in excess of 39%.

We all do better when we all do better. Respectfully, Supposn

I'm Supposn said:

... Although HR 528 is a good bill, I'm in favor of achieving 125% of the Minimum rate's February-1968 purchasing value rather than $15 per hour.
After HR 258 could be passed, enacted, and achieve its $15/Hr., $15 will be worth less than 125% of the minimum rate's February-1968 purchasing value. ...

Click to expand...

Captain Adverse said:

How inflationary?

Well it definitely doubles the cost to employ an unskilled worker, as the prior Federal minimum wage was $7.25 or thereabouts, although some State's had their own higher minimums.

That doubles the impact on the employer, and cuts into their bottom line after dealing with other fixed and variable costs. Small businesses will suffer most, although mid-sized ones may too.

Regardless, when operating costs go up, affecting profits, then business figure a way to cut costs, increase prices of their products, or both. The first cost to the small business owner is wages so they are likely to fire people or reduce their hours.

Those are the "impacts" we already see in the news.

Click to expand...

Captain Adverse, by “doubles the cost”, I suppose you're referring to $15/Hr?
The minimum wage rate's not among the primary causes of the U.S. Dollar's inflation, but it's certainly a victim of it. Inflation continues regardless if the minimum wage rate is or is not enacted.

The federal minimum wage rate should not, and never has been radically increased as to “shock” the nation's economy. HR 528 was drafted to be enacted in six incremental steps. When it achieves $15/Hr, $15 will no longer have that much purchasing power. That why I advocate rather than $15, the targeted purchasing power should be 125% of its February-1968 purchasing power.

A job's value is increased or reduced by its wage's purchasing power.
I prefer we pay for unemployment insurance and increase the value of the wages for the working poor and other lower-income earners, rather than reducing the value of all wages and increasing incidences and extent of poverty in our nation. The federal minimum wage rate has I suppose, a critical effect upon the 20th percentile, and a substantial effect upon the remainder of the 40th percentile of USA's full-time workers.

We all do better when we all do better. The corollary of that is if it's somewhat worse for some of us, it is somewhat worse for all of us.

Respectfully, Supposn

The minimum wage rate is not among the primary drivers of the U.S. dollar’s inflation:

(The fractional portion of the federal minimum rate that’s beyond the market rate for the least desirable USA employee or job applicant),

Times (the fractional portion of minimum rate’s effects upon the direct and indirect aggregate wage rates contributing to production of USA’s aggregate products),

Times (the fractional portion direct and indirect hours of USA labors’ costs to USA’s aggregate product costs),

Equals (the fractional portion of USA’s inflation rate due to the federal minimum wage rate).

When we multiply a fraction by each other, the product’s a fraction less than that of any of its individual factors. This is the reason why the minimum wage rate is not among the U.S. dollar’s primary inflation drivers.

Respectfully, Supposn

I'm Supposn said:

The only product that the poor can sell, is their labor. If that's undervalued, they're undervalued.

Click to expand...

A minimum rate means their labor is over valued.

I'm Supposn said:

The federal minimum rate's purchasing power peaked in February-1968 and it wasn't a particularly great boon to the working-poor then. The minimum wage rate will never be anything more than hard-earned.
But that doesn't justify the reduction of its value since then. Its purchasing power has been reduced in excess of 39%.

We all do better when we all do better. Respectfully, Supposn

Click to expand...

Purchasing power is irrelevant to what is earned. People don’t do better by throwing money at them.

Originally Posted by I'm Supposn
The only product that the poor can sell, is their labor. If that's undervalued, they're undervalued.

Aberration said:

A minimum rate means their labor is over valued. …

Click to expand...

Aberration, enterprise Managers we presume, are not motivated by altruism, but rather by their expectations of some gain, or reduction of risk and/or loss due to the employees they hire and retain.
Regardless of many managers’ whining, if their enterprise cannot obtain and retain superior employees at their enterprises’ going rates, those going rates are not excessive; otherwise in such instances, they’re managing poorly.

Managers are not required to hire or retain any individual employee. Respectfully, Supposn

Aberration said:

… Purchasing power is irrelevant to what is earned. People don’t do better by throwing money at them.

Click to expand...

Aberration, purchasing power is irrelevant to what is earned? Are not wages purchasing powers’ many employees primary motivation for working, or are they all generally altruistic? Respectfully, Supposn

I'm Supposn said:

Aberration, purchasing power is irrelevant to what is earned? Are not wages purchasing powers’ many employees primary motivation for working, or are they all generally altruistic? Respectfully, Supposn

Click to expand...

Supposn, correct. Non-sequitur.

Captain Adverse said:

How inflationary?

Well it definitely doubles the cost to employ an unskilled worker, as the prior Federal minimum wage was $7.25 or thereabouts, although some State's had their own higher minimums.

That doubles the impact on the employer, and cuts into their bottom line after dealing with other fixed and variable costs. Small businesses will suffer most, although mid-sized ones may too.

Regardless, when operating costs go up, affecting profits, then business figure a way to cut costs, increase prices of their products, or both. The first cost to the small business owner is wages so they are likely to fire people or reduce their hours.

Those are the "impacts" we already see in the news.

Click to expand...

Most likely inflation would only occur in industries that are significantly underpaid. Higher paying industries likely will not have any inflation at all, except for the scant tad created by the underpaying industries. Overall, doubling our minimum age may produce a once time inflationary event of three or four percent (on top of what would have occurred otherwise). I could deal with a one time 3-4% inflationary event, if it would all but eliminate poverty.

imagep said:

Most likely inflation would only occur in industries that are significantly underpaid. Higher paying industries likely will not have any inflation at all, except for the scant tad created by the underpaying industries. Overall, doubling our minimum age may produce a once time inflationary event of three or four percent (on top of what would have occurred otherwise). I could deal with a one time 3-4% inflationary event, if it would all but eliminate poverty.

Click to expand...

I doesn't eliminate poverty though even if we went to $20 an hour. There will still be poor people. In fact, they would be relatively poorer.

As for MW we should be somewhere in the $9.25 range now.

Captain Adverse said:

How inflationary?

Well it definitely doubles the cost to employ an unskilled worker, as the prior Federal minimum wage was $7.25 or thereabouts, although some State's had their own higher minimums.

That doubles the impact on the employer, and cuts into their bottom line after dealing with other fixed and variable costs. Small businesses will suffer most, although mid-sized ones may too.

Regardless, when operating costs go up, affecting profits, then business figure a way to cut costs, increase prices of their products, or both. The first cost to the small business owner is wages so they are likely to fire people or reduce their hours.

Those are the "impacts" we already see in the news.

Click to expand...

Captain Adverse, the $7.25 per hour minimum wage rate was enacted July 24, 2009; it’s still at $7.25. The minimum wage rate’s “real” value expressed in August - 2009 dollars is $6.07 . Within the duration since then, purchasing power cost to employ an unskilled worker has been reduced by more than 16% and within the duration since February-1968, (when the minimum rate’s value peaked), its been reduced by 40%.
(refer to [CPI Inflation Calculator ).

Minimum wage rate is of no competitive advantages between any USA enterprises. Competitive disadvantages are the meaningful disadvantages to commercial enterprises. I’m among the proponents for USA adopting the improved trade policy described within Wikipedia’s “Import Certificates” article,
(refer to Import certificates - Wikipedia ).

Paradoxically, although permitting the minimum wage rate’s purchasing power to be reduced or be entirely eliminated would provide more jobs entailing tasks that previously did not justify the cost of minimum wage rate labor, the consequences would be to increase the rate of unemployment, and particularly increase that rate among unskilled workers.

Any slight increase of GDP that might possibly be achieved by sub-minimum wage rate jobs, wouldn’t justify the reduced purchasing power of wage rates in general. Permitting the minimum wage rate’s purchasing power to be reduced or to be eliminated is consequentially net detrimental to our nation’s economy.

Respectfully, Supposn