The Federal Reserve influences inflation by lowering interest rates to spur demand or raising them to curb it. The idea is that if demand for goods and service can be stimulated, prices will rise and inflation will be increased.
If that is the basis for our entire economy, shouldn’t it be true that raising the minimum wage will have a similar effect, especially on the goods and service most important to low income individuals? In fact, proponents of a $15.00 minimum wage say that doing so stimulates buying and thus helps the overall economy.
Okay, I buy that, but does it follow that the minimum wage worker is better off in the long run?
Raising the National minimum from $7.25 to $15.00 does not only impact workers earning between those amounts, but likely all workers up the line perhaps those now earning up to $20.00 per hour; it’s called pay compression.
If your job is worth $15 and hour when the minimum is $7.25, why isn’t it worth $30 when the minimum is $15?
This means more stimulation, and higher prices. Perhaps that’s good for the economy in general, but where does it leave the worker still in a minimum wage job?
At $15.00 a family of five with one full-time minimum wage worker would no longer meet the threshold of poverty; $30,440. With two workers at MW, the household income exceeds the current median for all US households.
Do we set new poverty levels? Do we redefine eligibility for all income related safety net programs? Could MW workers actually lose more than they gain? This happened to some folks when pay increase caused them to lose their ACA premium subsidies.
Here’s the thing, we need to consider all the implications of the MW rhetoric to be sure we are actually achieving the intended goals.