Monday, March 14, 2016


Minimum wage
Domino effect:
Expensive benefit



When I started my first job after a stint in the Air Force (c 1962), the minimum wage was $1-an-hour, which is exactly what I was paid working at an Orlando (FL) area hospital. (I'm not certain if the hospital still exists.)

My room rent was $10-a-week - shared bath - and I traveled by city bus (25 cents-a-ride).

Today the minimum wage in Florida is $8.22, up 17 cents from 2015. The cost of a room is "slightly" higher than what I paid back in the 60s. The least expensive room I found in Orlando was $100-a-month; $25-a-week. The then-private Orlando transit was "absorbed" by the government and a quarter today won't even get the bus' door open.

By comparison, my monthly pay in the Air Force ranged from $85.80 to $108 per month before taxes; today the same grade is paid is a flat $1,758.80.

ALL THE ABOVE can be blamed on "inflation."

But what CREATES inflation?

According to Economics Help, the main culprits include:

  1. Demand pull inflation
    If the economy is at or close to full employment then an increase in AD leads to an increase in the price level.
  2. Cost Push Inflation
    If there is an increase in the costs of firms, then firms will pass this on to consumers. There will be a shift to the left in the AS, including

    • Rising wages
    • Import prices
    • Raw Material Prices
    • Profit Push Inflation
    • Declining productivity
    • Higher taxes

Other causes of inflation, according to Economics Help, are rising house prices and printing more money.

Increasing the minimum wage is "rising wages," one of the causes of inflation cited above.

A hamburger at the Miami-based Royal Castle store near the courthouse in Orlando cost 15 cents - a bowl of chili was 25 cents - c 1965. The last Royal Castle in Miami sold the same burger or more than $1 in 2014.

I am all for a person having a living wage, but raising the minimum only drives up wholesale and retail costs that eat up any increase the minimum wage generated.

Catch 22.

No comments: