
Originally Posted by
Melonie
^^^ well, that depends on what you pick for a starting point for comparison !!!
The bottom line is that minimum wage laws do not create any more 'value' in exchange for the mandate to pay more dollars. This is inflationary by definition. If an employer is mandated to pay more dollars for labor, those extra dollars must be recouped by charging higher prices for the goods or services provided. Unless more 'value' is created somehow, increasing labor costs leading to increased prices for goods and services simply amounts to a revaluation (actually devaluation) of the US dollar for everybody who uses US dollars.
This US dollar devaluation then instantly increases the US dollar cost of all imported goods and services, with the major items being oil / gas, metals and plastics (major components in every manufactured good) - which sets off yet another round of dollar inflation. This will of course be immediately followed by calls that the minimum wage as well as wages of higher skilled higher paid Americans must be increased yet again.
Seemingly the only 'winner' in this inflationary spiral is actually the US federal / state / local govt's because their tax rates are progressive. In other words if taxable incomes in terms of total US dollars go up 10%, tax receipts go up MORE than 10%. Also, these govt bodies benefit because their old debts i.e. outstanding bonds can be more easily paid back with tomorrow's US dollars that are 'worth' 10% less than yesterday's US dollars. Heavily indebted consumers also benefit from the same mechanism.
However, savers / investors get screwed because they must stand by and watch the 'value' of their savings / investments drop in terms of purchasing power even though the US dollar value of those savings / investments is nominally still increasing. Going back to Dr. Paul's comments about 1971 prices, one could buy a decent new car for US$5,000 and one could retire comfortably on US$100,000 back then, where the minimum wage was something like US$3.00 per hour. Compare that to today's decent new car costing $15,000, a minimum retirement nestegg being about $333,000, and the new minimum wage being $7.25 today in some states. In terms of 'purchasing power', even with the increase the minimum wage worker has lost - as have middle class workers, savers / investors i.e. essentially everyone who deals in US dollars.
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