ELI 5: How does a large increase in minimum wage not just create an inflated economy?
I am genuinely curious on how an increase in minimum wage would increase the spending power of the country rather than just drive up prices.
In order to give minimum wage workers additional spending power it has to come from someone else. I would imagine companies would pass the additional cost on to consumers, just like they do with all other costs. So companies margins stay the same and their buying power from profits is the same.
The second option is that minimum wage goes up, but people the wages of anyone above minimum wage are not affected. So companies are going to raise prices to keep their margins the same, the buying power of higher paid people is decreased - likely middle class who don't own business. Are people going to take a reduction in sending power without asking for an increase in their pay?
So from this really comes two options. The middle class reduce their spending power to increase lower income sending power. Same as taxing the middle class, right? Or, everyone gets a raise driving up prices and spending power of everyone equally, essentially ending up as inflation.
I'm not trying to bash on Bernie, I am genuinely looking to crush arguments against Bernie (and clear up some of my own doubts). Examples with numbers are encouraged rather than just arguments (although both are good).
Posted Feb 22, 2016, 4:11 AM UTC