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Shouldn't minimum wage just increase proportionately to inflation? (lemmy.ml)

submitted 1 year ago by [email protected] to c/general

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Most jobs will give you a performance review and a raise every year to account for inflation and any increased duties you've taken on. We increase minimum wage by massive amounts after far too many years which causes all sorts of economic concerns, business complaints, and just a bunch of arguments everywhere. Shouldn't they just increase minimum wage 3.5% or whatever, every single year?

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[–] singron 9 points 1 year ago (2 children)

Economists think that directly tying wages or prices to inflation can cause inflationary spirals. CPI is based on prices, and raising wages will eventually raise prices and CPI, so if you raise wages based on CPI, it can enter a positive feedback loop.

It might be ok if the feedback is slow enough or if the minimum wage influences a macroeconomically insignificant proportion of wages.

[–] [email protected] 3 points 1 year ago* (last edited 1 year ago) (1 children)

We definitely don't want that, since that hurts everyone, sapping value from wages and savings. I'm definitely not an economist. I was just thinking about how long we go in-between minimum wage increases and how it impacts prices every time it goes up. I was wondering if it would have less of an impact if it was raised incrementally instead of sudden big increases.

[–] [email protected] 3 points 1 year ago

I was wondering if it would have less of an impact if it was raised incrementally instead of sudden big increases.

It probably does yeah. You can clearly learn sth about power within our system by seeing which jobs adapt their wages to inflation first. Aside from the ones who are in high demand anyway.