Should wages increase annually with inflation?

[Maverick J-Mac]

I think I'm supposed to type something in here too.  Minimum wage could go up a couple dollars an hour, but the thing is if it's too high we're stuck with long term inflation.  Like most economic issues, I consider myself to be very much a centrist.  What are your thoughts?

[136or142]

This is actually one of the major reasons why economists think a little inflation is a good thing.

What psychologists have found is that people have an aversion to loss, but that a loss can be hidden if it doesn't seem real.  So, if you have zero inflation but if a business can't afford to pay its workers what it's already paying them, psychologically the workers will resist be given an actual pay cut.

However, if you have two or three percent annual inflation, a business that can't afford to pay its workers what it was paying them at the beginning of the year, can simply not increase wages and give the workers a de facto pay cut while the workers psychologically won't feel the same reduction in pay.  Of course, this can only work for so long.

[Kingpoleon]

Not really. By tying the minimum wage to inflation, if inflation suddenly spikes we would see a major layoff for those in the working class, thus causing the unemployment rate(esp. for those with minimum wage or near minimum wage) to be tied to inflation. This would be an economically disastrous decision that would return us to the late 1970s.

[Sirius_]

Not really. By tying the minimum wage to inflation, if inflation suddenly spikes we would see a major layoff for those in the working class, thus causing the unemployment rate(esp. for those with minimum wage or near minimum wage) to be tied to inflation. This would be an economically disastrous decision that would return us to the late 1970s.

I can see your concern but a spike in inflation could also cause businesses to bring in more income due to price adjustments thus mitigating the increased wages.

It is clearly about time that we raise minimum wage. I'm fine with it staying the same for a few years but our minimum wage has stayed the same for far too long.

[GM Team Member and Senator WB]

Not really. By tying the minimum wage to inflation, if inflation suddenly spikes we would see a major layoff for those in the working class, thus causing the unemployment rate(esp. for those with minimum wage or near minimum wage) to be tied to inflation. This would be an economically disastrous decision that would return us to the late 1970s.

I can see your concern but a spike in inflation could also cause businesses to bring in more income due to price adjustments thus mitigating the increased wages.

It is clearly about time that we raise minimum wage. I'm fine with it staying the same for a few years but our minimum wage has stayed the same for far too long.

Mmhm.

[mileslunn]

Yes it should with periodic adjustments.  The reason is simply minimum wage is too often used as a political football.  For parties on the left, they do better when they have dramatic rises even if they are not economical while parties on the right who rely more on business owners have every reason to not raise it so it takes the politics out of it and also keeps it stable and predictable rather than have a left wing government dramatically raise it, when they get turfed the right wing government freezes it for many years and then the left wing government when it comes back dramatically raises it so a vicious cycle.